All Forum Posts by: William Anderson

Most large insurers will offer a landlord policy which includes higher liability coverage and usually loss of income.  The cost is higher but it’s a must for income property protection.  Better find an insurance broker who offers choices

At the start of section 8, make sure you have thousands of dollars in the bank for property repairs and maintenance.  There is nothing special about section 8 except the government will pay you each month.  The quality of tenants is terrible as a rule.  They don't own anything, have put no money into the property, and generally will destroy your investment.

I know this sounds terrible but that's life.  I found one person on this forum who likes section 8, he did not explain why he likes it or how he prevents damage.  Just offer your property for rent at the highest price on the market.  Keep it well maintained and raise the rent each year.  You will do much better.  I am speaking from experience. I recently sold a rental property that came with a section 8 tenant.  This one was a fairly inexpensive repair, only $6,500.  

Do some serious research as you are doing by asking on this forum.  Good luck

@Harrison Colunga your $35k is almost meaningless in California.  I sold my house in Lake Elsinore five years ago and moved to the Mississippi Gulf Coast so that I could actually afford to live and invest.  I have helped many people from other states and in particular, California find properties in my area that are affordable.  At present, I have a client in Norway who is looking at a property valued at less than $100k.  It's in good condition.  There are many properties in this market that are priced at less than $150k and will rent well.  

Sorry, I did not actually intend to provide advertising. Something you should consider is finding others with $35,000 to invest. Create an LLC with multiple investors. Build a bank account and go after properties outside of California. I have put together several investor groups who have put in as little as $5,000. They own a portion of 100% based on what they invest.

If you want to finance a property, someone has to be on the mortgage, it's possible to put multiple people on a mortgage but the interest rate will be based on the lowest score.  I am on a few notes where I am an investor.  

I would agree not to spend all of your money taking courses but you should take a course or learn by experience.  Experience is great but it comes with mistakes.  Try KEYLADDER.COM there is a $500 course, a very small investment in doing it right.  This forum is good for general advice but you are the only one who knows your own circumstances. Applying the course tools to your specific situation will help you make better decisions.  Keep coming back to the forum to fill in the gaps.

You and many of us on this forum have started our journey by holding on to our primary home and renting it when we moved.  I did this with four houses in a row.  As I moved from each, I retained the former.  It's all about the numbers.  It looks like you can make some money based on the rental estimate in your area.

I recommend you hire a property manager.  This will allow you to sleep all night.  I have tried it with and without.  There is no doubt that a property manager is a way to go if you are not in the area and even if you are.  If this is the first of many, do it right out of the gate.

Set this up as a real business.  New bank account, and accounting system (Waveapps.com is free).  I even recommend KEYLADDER.COM for a course starting.  Later you can do some exotic things like borrowing on the property to leverage another.  Take baby steps, you are making the right move based on what you have said.

I won't wish you good luck, you probably don't need it.

The main reason why the answers are so varied is your situation and your inability to judge what is best for you without data. Yes, you will be required to pay income taxes on your withdrawal based on your year-end income vs expenses. The two non-tax options are as mentioned, opening a self-directed IRA with a firm that specializes in this. The funds leave your 401k or traditional IRA directly to the SDIRA company. You can use the funds to buy investment property but all of the income must be returned to the SDIRA. This means you can not live on this income unless you want to pay taxes on withdrawals from the SDIRA. There is no tax event if you don't touch any income.

Look at your investment as if it was a dividend-earning stock. Evaluate the return on your investment property against other investments in your equity portfolio. Be sure to factor in appreciation and depreciation. If you buy right and can generate a good ROI, using an SDIRA may be better.

I would also agree with some that even paying taxes may be acceptable if the ROI works out. The biggest negative as I write this is that your portfolio is probably down at least 30% along with the rest of us. The market will likely rebound down the road, if it does, losing 30% means you need to do very well with your new investment to overcome the loss. If however, that 30% is largely income you have earned above your base contribution that is another consideration.

At some point, you will have to take out funds from your qualified retirement plans and be taxed on it. That may be at age 73 (new law) but if you are earning the standard 7% in your IRA and you can make 15% in real estate, that's something to think about.

Lots of people caution against touching your 401k.  I would agree if you are funding a vacation but if what you are doing is making a change from one type of investment to another to improve your income, make the best decision based on the numbers.  Money is not emotional, it is just money and money loves company.  

Regarding software checkout Waveapos.com it’s a free accounting system.  I use it for all of my investments.

It’s been my experience that using a property manager is the way to go if you want to scale.  Don’t buy the property if you can’t work in the property management fee.  I can write a book on how self management can eat up your time and add stress.  

I like Costco for some but Sams Club has a line of commercial products located where they sell aluminum warming trays and similar items.  They sell big packages.  All of the products are white.  There are some benefits to white, bleach, etc. but others have comments about dark colors to avoid showing stains.

We buy a few black face cloths for women to remove their make-up.  Makeup does a number on white face cloths and even hand towels.  The pricing is good at Sams so you can replace them on occasion at a low cost.  

If you want heavier products the ones at Costco are what you need although they are more costly.

I have had section 8 renters in Nevada and elsewhere.  There are many comments on Bigger Pockets about this topic.  People either love them or hate them with more on the hate side.

Section 8 means the government pays the bills.  This should mean something to you.  The clients have no skin in the game, not even a deposit.  Many will tear up the property far beyond the deposit the government provides.  They are a lot of work to manage. 

I will not take a section 8 renter for any of my properties because of my personal experience which is shared with many, many other property owners.  Getting that monthly check on time will not make up for the thousands they may cause down the road.  Plus they can chase away other renters if you have multi-family properties.

Steve Henson, Henson CPA's. He has been my CPA for over 30 years. He is a property investor and holds a real estate broker's license as well. His firm's specialty is working with small businesses. He has managed my large corporation and multiple LLC's over the years.

You are absolutely correct to look for a CPA with real business experience helping business owners.

https://www.hensoncpa.com/  his contact info is located on his website.

I assume you have a brokerage account. Call the vendor and speaks to an agent. They will offer free information and even advice. The best thing is to use their website to locate the REITs they offer and research them. If you want to look at the dividend payout history, go back about five years. Look at their prices. Many REITS are now at the lower end of their range because the overall stock market is down. If they are paying out a high percentage now, remember the yield will drop as the value of the REIT rises. Starting with something above 10% is an excellent first step.

I have owned REITs for years even though I own residential rental property.  Putting money in both is a good way to diversify.  REITs come in all types.  Some are residential, some commercial some industrial.  I like REITs that invest in senior homes as the Boomers are getting older and there will be a great need there.

Some REITS invest in big box stores and shopping centers.  Perhaps buy in more than one to hedge inflation and diversify.  It's always good to have dividend stocks in your portfolio