All Forum Posts by: Pierre Streat
Pierre Streat has started 12 posts and replied 53 times.
Originally posted by @Eric Tait:
There is also another way to look at this depending upon how skilled you are in using real estate to achieve your investment goals.
In a 401k plan you are locking away your money until you are at least 59 1/2. You are going to be at the mercy of the stock market and it's vagaries.
If you know what you are doing in real estate, you can create your own "match". It is very easy to do in single family home buy and hold. When you purchase and/or renovate a property below it's market price, you have created equity or "matched" your contribution.
( If you put 10K down and gain 5K in equity you have a 50% equity "match")
It is a capital gain, just like it would be in the 401K, but you can later access that money through lines of credit, second mortgages, or an outright sale (making it a long term capital gain at worst, or a 1031 exchange at best).
If you are renovating the property, the deductible costs of renovation will give you a tax deduction (just like your pre-tax contribution).
What people often seem to not take into account with 401K plans is that the money that you have in there is not really your money. The easiest way to prove this is to have you try and go and get it all and spend it. The average person will lose close to 40% of the value right off the bat with ordinary income taxes and penalties. Also, you may have a vesting schedule with your employer so that the "matched" funds take time to actually be "yours". So yes, it works as a forced savings vehicle but it does not materially improve your current life situation.
No one retires early "investing" in a 401K.
100% agree with Eric. I am currently switching employers and would like to take that vested amount with company matching in my 401k to invest in a multi family. The problem is that if I take this out in cash, the Feds will withhold 20% of it for taxes right off the back and although I do not think NY state will withhold as well it still a substantial amount to lose. I am currently leaning more towards just rolling it over into a Traditional IRA where at least I can have some sort of "control" with lower expense ratios than the BS mutual funds offered in 401ks. Anyone with solid reasoning on why taking the tax hit and buying the multi family is a better idea, I am all ears.
Post: Baltimore City cash flow properties
- Investor
- Philadelphia, PA
- Posts 53
- Votes 5
Originally posted by @Account Closed:
Thank you for replying Seth. I would like to connect with you offline to discuss. Please ping me privately.
Post: Baltimore City cash flow properties
- Investor
- Philadelphia, PA
- Posts 53
- Votes 5
Hello All,
Are there any cash flow focused investors out there who primarily invest in Baltimore City by any chance? Anyone find anything that fits the 2% rule? I recently came across a multi fam with an monthly rents/purchase price of 1.197% but would like to get something close to 2%. This property is relatively turn key but could use some updates ($30k) in order to charge at full potential market rents. It currently churns(as is ) slightly over 6% cash on cash net after 10% property management fees. Where can I find those properties that are 10% cash on cash even after property management fees? Are there any fixer upper opportunities in decent neighborhoods where I can find this? I would like to try to avoid Section 8 as well as mixed use properties since this will be my first purchase in B City. Thoughts and advice are greatly appreciated.