All Forum Posts by: Travis Biziorek

@Kevin S., our company is only six full-time employees, not that that matters but just giving you an idea of the size.

My wife and I have about $50k in cash right now but a sizable 401K balance that would allow me to loan the maximum. I'm essentially amending the plan so that I can loan on my balance. This obviously would allow other employees to do the same, and I'd advise them on the risks before doing so.

@Doug Phillips, a couple things come to mind. I own a small company and we offer a 401K to employees through Betterment.

Our plan is a "Safe Harbor" plan which just means it's not very customizable. We match 100% up to 4% gross income. Safe Harbor plans are out-of-the-box in an effort to keep setup costs to a minimum. They're great for a small company like our because it makes it super cheap to start offering a 401K benefit.

The thing about Safe Harbor plans is they vest immediately, and the employer MUST contribute the set amount. So even if an employee doesn't contribute, my company must still contribute 4% of their gross salary and it vests immediately (literally free money).

So ask if it's a Safe Harbor plan, and if so, clarify this point. If you're getting 4% free and clear you may decide not to contribute at all if you're looking to invest in real estate instead. After 4 years of maxing my 401K out I've just stopped contributing to do just that.

Secondly, review (or ask HR) If the plan allows you to loan against your balance. Ours did not but I've just amended it so that we can. If you can loan against your 401K you'll be able to loan 50% of the total vested balance or $50k (whichever is less). The loan must be paid back via your paycheck (with a small interest rate paid to yourself) over 5 years unless you are using the money for a primary residence in which it can be paid back over 15 years.

There are two catches:

1) You can't make extra payments on the loan without paying it off in full

2) If you leave your employer the loan must be paid back in full immediately (I'm not sure exactly how long, but it's quick).

I'm outlining this because there's a clear benefit to investing in a 401K since it's pre-tax money. While I was contributing the maximum (~$1,500/mo), I'll be lucky to see $1,000 of that as net pay (obviously this depends on your tax bracket). 

So you need to ask yourself a couple questions like, is it best to contribute the maximum to leverage pre-tax savings and then loan on that amount down the line? Is the money instead more valuable to you now to be used for real estate acquisitions? 

It all depends on your personal goals. And some of the things I mentioned above could change the answers to those questions, especially the Safe Harbor one. 

The way my wife and I see things right now, our main objective is purchasing cash flow properties to reach financial freedom. Contributing to my 401K doesn't align with that goal even though the pre-tax savings is significant. The fact that I still get the 4% company contribution is nice. If I didn't I'd likely contribute up to whatever the company would match (in my case 4%).

I am not a financial adviser, so please take everything I say with a grain of salt and do your own due diligence. 

Best of luck!

Thanks @Joshua B.! 

You're absolutely right in regards to UofM being a draw. We wanted somewhere liberal, at least medium sized city, etc. AA just checks a lot of boxes for us.

Our home here in the Bay Area will be hitting the market in mid-March and will likely sell within a couple weeks. So we're hoping to be in Michigan right after that, house hunting and ready to pull the trigger in A2, but we're flexible on timeline.

We're already working with an agent in A2 but my wife and I have always wanted to flip houses. We just haven't had the opportunity out here because everything is so expensive. 

We'll likely have ~$80-$100k cash after settling into our new place in A2, and that got me looking at Ypsi seeing as there seem to be a lot of houses that need some TLC in the <$50k range. Seems like a great way to to get some experience without putting too much at risk.

My wife stays at home with our 7-month old son, and I just started working remote. So we have the flexibility to flip. We'd like to start doing it more and more seriously as we gain experience. 

So at this point I'm really hoping to network with folks that understand the market, especially Ypsi since that's where I think we'd be able to afford doing our first flip. I'd love to link you to some properties I'm seeing and try to understand if they'd be worth looking at or not. 

Eventually we'd want to build our flipping "team" (e.g. realtor, attorney, contractors, etc.). 

I know that's a ton of info, and maybe I'm getting ahead of myself but that's our current situation.

I know this is an old thread but my wife and I are moving to Ann Arbor in the next 4-6 months from the SFA Bay Area. After purchasing our primary residence we want to get our start with fix and holds/flips too. Hoping to start in Ypsi where we can get something cheap and get experience with little on the line. I'd love to connect with folks in Ypsi before our move!