All Forum Posts by: Phillip R.

And for what it's worth, I looked into the rules regarding taking a loan from my TSP (401K), the rules specifically said that the interest paid back for the loan would not be tax deductible.

Thanks @Glen Sonnenberg .If that's the case then I know that's not the avenue I want to go.

This may have been discussed already, but I have one question regarding a self directed IRA or self directed 401K: wouldn't all the profits and cash flow have to stay within that self directed IRA/401K? Put another way, would I not be able to spend the profits on my personal costs such as groceries or gas? If that's true, I would have to find income from elsewhere or other sources.

Thanks for all the responses. While I realize you're still debating whether 401k loans are deductible, I think my gameplan starting next year is to continue maxing out our two ROTH IRAs but only contribute up to the match on my 401k (which is 5% of my gross pay. That will give me another $13000 a year I can use for REI down payments. I'll consider 401k loans in the future as well, but I'll have to run the numbers for myself to see if that's something I want to do.

I've liked seeing my retirement portfolio grow, but it will be 30 years before I access those funds and I want to quit my job and work for myself long before I turn 59.

To answer a few of your questions, I own a home that we converted into a rental. We currently live outside the U.S. so we're not in a position to buy a new home or rental, but I want to plan out our savings over the next three years in case we do want to buy another home or rental upon our return.

With regards to a self directed ROTH IRA, the few REI books I have read recommended against that to novice investors (me) and because you can lose some of the tax benefits normally given to REI properties.

I get a 5% match on my gross, so I could reduce my 401k contributions, but the idea of taking out my earlier ROTH contributions with no penalty does intrigue me as well. Between my wife and I, I think we have contributed about $35,000 to our ROTH IRAs.

I'm married, age 29, and make less than six figures. My wife stays home with our two kids. This year and last year we maxed out my 401K ($17,500 annually) and both our ROTH IRAs ($11,000 annually). This has allowed us to substantially increase our retirement savings, but it has severely limited our ability to save for the down payments of future buy and hold investments we'd like to make in the coming years.

With the assumption that we're not able to cut costs elsewhere, would you recommend we trim our retirement contributions, and if so by how much?

How come only one of the names I replied to highlighted?

@Arjun K. if I refinanced into 4.375% over 30 years, my total debt service would be $13,500 for a positive cash flow of $3,200. That sounds much better to me and makes me happier with this rental; however, I wouldn't consider refinancing yet again. Cash flow is important, but I have a good job and can easily cover the outlays.

@Rick Baggenstoss you made some great points that were in my head but you crystallized them. If I were to sell, I'd just put the money into mutual fund in a taxable investment account. I would not invest more real estate while I'm still in Germany, and I do plan on becoming a long time real estate investor and holding onto this rental will only increase my knowledge and experience.

@Elizabeth C. my operating expenses are: $2000 for PM, $3000 for property taxes, and the remaining is for insurance, HOA dues, and maintenance. I am not prepared to fire my PM as I see my first real estate investment as much an opportunity to gain knowledge/experience as it is to gain wealth. I like to bounce ideas of my PM and see how she handles issues with tenants.

We may consider moving back into the property if we move back to DC and if I can talk myself and my wife into it. If we did move back there, that would allow us more time to sell the property using the capital gains exclusion rule that @Ned Carey and @Michael Siekerka referred to. I have one question on that rule...February 2015 is the very last date we could sell it and still say we lived there in 2 of the last 5 years. However, the lease would likely end in March 2015, so let's say I happened to sell it in April 2015 (and therefore had it approximately 1.8 years of the last 5). Would that sale allow me to exclude most of the gains from the capital gains rate on a prorated basis?

Thanks all for the warm welcome. I would be most appreciative if some of you wouldn't mind going over to the other discussion topic I created to give me advice on whether I should sell my investment property. It's at http://www.biggerpockets.com/forums/88-real-estate-deal-analysis-and-advice/topics/104714-should-i-sell-my-only-investment-property.

This is my second post, so forgive me if I don't provide all the necessary useful information for you all to help me make this decision. I've also been running the numbers the last few days, so errors in my calculations of cap rate, ROI are possible.

I bought a 3 BR 3.5 Bath townhouse in Alexandria, VA (in the DC metro area) for $280,000 in 2009 as my home. I converted it to a rental in 2012 when I moved to Germany for my job. I will probably not return to live in the house when I return from Germany in the next 2-3 years, but it is possible.

Gross annual rent: $24,000

Operating expenses: $7,300

NOI: $16,700

Mortgage interest ($250,000 x 15 years @ 3.25%): $7,460

Principal Payments: $13,620

Total Debt Service: $21,080

Cash Flow: $-4,380

Cap Rate: 6%

COC ROI: -15.56%

Original purchase price (2009): $280,000

Approximate current price (2013-2014): $340,000-$370,000

I still haven't figured out how to accurately determine my investment basis (and total ROI) since I'm not starting from year 1.

The property could probably easily sell for $340,000 based on nearby comps. My real estate agent/property manager says it could sell for as much as $370,000 in the spring, but I'm not counting on that.

Here's the interesting situation. The two tenants I've had so far are diplomats and they rotate out each year and their replacement has taken it over. The current tenant has already asked if his replacement can continue renting when he leaves in March 2014.

There are of course extra risks with renting to diplomats because they have diplomatic immunity and can't be taken to court or evicted. However, I haven't heard any stories of diplomats in the area not paying rents, so I took a chance on them. They have paid on time the past two years and have been generally great tenants. They have told my real estate agent/property manager that it's been difficult for them to find a rental in the past.

Market rents are in the $24,000-$25,200 range, but my thinking is that these diplomats probably don't want to look for another rental unit as that would cost them extra to get an agent and not all landlords want to rent to diplomats because of diplomatic immunity. Also, their embassy pays all costs so the tenants might not care as much about how much the rent is. So, I think I might be able to charge a higher than market rent to them.

As you can see, I'm currently negative cash flow, but that's partially from using a 15 year mortgage.

Should I sell? Should I continue to rent to the diplomats? If so, should I hike the rent up? How much?

Any and all thoughts would be greatly appreciated.