All Forum Posts by: Paul Vail

Quote from @John Morgan:

@Alex Ballesteros

I would pull out some money you have put in your Roth IRA and use towards buying properties. It's tax free and is a great way to start. That's what I did. I pulled out 92k from our Roth IRAs when I was new to RE. Best decision I've ever made. Just don't take out more than you put in. You can't touch the earnings in it tax free until 59 1/2. Also, if you have a 401k I would take out a 50k loan. I've done this a few times to buy RE or find rehabs with it. Good luck!

John, the Roth is the most tax-advantaged account @Alex Ballesteros has.   Earnings in a Roth has the advantage of automatic gains equal to one's tax bracket.  E.g., if the OP is in a 23% tax bracket, the Roth is earning 23% AT A MINIMUM plus whatever the Roth assets actually earn (say, 7%/yr-yr with VTI as an example).  That's a 30% gain.  Respectfully, cashing out the Roth is a horrible idea under most any circumstance beyond paying off a debt obligation interest in excess of 30%/yr.  And we are presuming the OP has had a Roth for at least 5 years, otherwise there are fines/fees to access.

Without knowing the numbers in the personal brokerage, the Roth or the SEPIRA or even how much is needed for this prospective deal, I suspect a qualified financial advisor (I am NOT a CPA or CFA) would suggest the Roth is the last tool to touch, with the personal brokerage being the first to discharge from for the deal needs.  Alex -- for the love of gods and money, and your financial future, don't take action on our ideas here in a forum.  Hire a fiduciary financial advisor and see what they tell you. Heck, you could check out a REIT opportunity like Fundrise [https://fundrise.com/r/244jp7] and look into how they'll roll a tax-exempt Roth or some tax-deferred IRA forms for investing.

Sell the car and accept a beater for a year or two.  Hell, a moped.   This will be the last year used cars are at or above sane market values.

Hmmm -- someone who is 20 and simply contributes $5k to a Roth every year, dumping it into something that averages 7% yr/yr (say, VTI) will end up with >$4mil by 80.  

I disagree with others saying to abandon HSA contributions.  Those have multiple plusses -- tax advantages, a forced health savings account, tax-free earnings forever, and frankly you can only contribute but so much per year.   But that compounding effect, just like the Roth example above, is what makes you FI.   Along with unlearning some bad habits and developing good ones, you have so many resources already at your disposal, and with a bit of discipline, your debts could be discharged in under a year.   You can easily do it.  Do you want to?

Helen, you can also make use of tools like the free PersonalCapital.com website and app.  You don't need to buy into their advice services.

You mentioned insurance comes out of your paystub.   Health insurance?   One of the things many people don't consider is that they, by default, buy too much health insurance.   The whole medical/insurance industrial complex is predicated on selling fear as well as unnecessary services.   Many folks can get as much or more out of a HDHP (high deductable health plan) that would qualify them for a HSA account.   Many HSA account providers offer not only savings accounts, but investment accounts (Old National Bank and HSAbank are but two).   An HDHP with an HSA has a handful of great benefits:  you still get healthcare, 'though with the high deductible you may pay a bit more initially for a year's worth of routine work out of pocket.  That little bit more out of pocket is offset by much more affordable premiums out of your pay.  Qualifying HDHP that permit an HSA now let you open and fund the HSA with fully 100% tax deductible contributions (check the IRS rules for max limits any given year).    HSA earnings are fully tax-free for life (like how Roths operate).   HSA contributions and earnings may be used for qualified medical, dental, optical, and mental health expenses - oh, and medicare premiums.  HSA accounts may have non-qualified withdrawals after the age of 65 for anything, treated as only ordinary taxable income.  HSA contributions and earnings are yours for life - even passable your heirs (this is NOT a FSA account).  

Do a bit of both -- pay down debt while rebuilding some reserves.  While Chris' math is correct and paying off the debt is the logical thing to do, we are not logical animals.  Having just a bit of buffer, even if it's only $1000 in your checking account, will offer some peace of mind and reduced stress over $1 in checking and $1000 less on the credit card statement.   Counter-intuitive, but it's how most humans work.   If you are paying off the credit cards by insuring every new purchase + accrued interest + at least the calculated minimum is made on time every month, you'll preserve your FICO, and build up cash reserves for unexpected crap that would otherwise just go right back on the card statement.

Once the cards are paid off in full, NEVER run a balance on them again.  Lesson learned.

If they ever have qualified income (modeling for your business website photos, etc.), then a Roth for them with VTI or similar components is an option.  I-Bonds to have safe, inflation-managed opportunity.

Ally.com offers decent CDs with reasonable fees for having to cash them out early.  Very unwise to hold others' money in non-FDIC accounts.

http://afterhoursconsulting.or...   

I used this to help teach financial ideas to coworkers in a retail environment.  It focuses a bit more on money management and paper assets, but delves into the basics of creating financial independence.

Quote from @Tammy Ginsburg:

Hello,

Is it still a good time to invest into multifamily?  I am in the process of looking for my first property and I am extremely nervous. I hear so many experts, saying the market is going to crash!  

Plus, I have to sell my Condo, because I will be living in one unit and renting out the others. I hope I can get what I will asking for.  Any thoughts would be helpful.

Don't worry about the news.  Worry about the numbers.  Will the rent from the other units be enough to cover your expenses?  This is not hard for you to define -- determine all of your bills and your income.  Are you going to be net positive at the end of every month?  If so, you're fine.   If not, then find a way to make the numbers work, or don't do the deal.

Quote from @Katrina Morato:

My husband is very much into the idea of paying off the condo to get the extra $1200 cash flow monthly. And to also free up part of our VA loan to potentially get another property without needing down payment.

We are opposite in that aspect, where he would like to sit and see where our investment takes us- and I on the other hand feel like we’re wasting time if we don’t have a new project going.

I do see his point with paying the condo off. I received a phone call today saying that the heloc i am requesting from our primary residence was denied because of our high dti. The two short term rentals are less than two years and they do not consider that as a source of income.

Hmmm - thanks for the additional info. I am NOT a financial advisor, nor do I play one on TV. My ideas are strictly for educational and entertainment purposes. However, you brought up two great nuggets -- the VA loan status AND your DTI messing with the HELOC. Back in the day, we called HELOCs 'second mortgages', and they weren't a thing to be proud of as most families that had to get a second mort on their primary home were in deep financial privy pits. Now, things have been repackaged as a 'tool' and not additional debt. I'm a bit guarded about my primary residence and wouldn't be as comfortable assuming another risk to my roof -- but this idea is really popular among those who haven't seen many of their neighbors lose their homes in 2009, or 2001, or 1990, or 1982... Then again, you guys have more job security than folks in the private sector.

But the VA loan system. Maybe explore how much you'd have to pay down on the primary note for the VA to play ball. That's a terrific tool. You get to use that every, what, 2 years? If it doesn't consume all of your nest egg, then you'll have money left over for the RRR parts of your BRRRR game with the next property. And maybe look around beyond Tidewater for opportunity. Smaller college towns like Lynchburg and Radford could have some choice multi-family for students.