All Forum Posts by: Yuuj V.

Good morning BP!

I am looking for properties in North Carolina, but not being in the state poses a bit of a challenge. 

Does anyone have a referral for an inspector? Someone who can do on-site video's and pictures. 

Thank you!

Hello Hivemind!

I'm hoping someone can lend me a hand on this math problem...

HYPOTHETICAL: I have a $100,000 401(k) account. I can take a loan for $50,000, with a payback period of 5 years and interest rate +1 point above prime lending rates. (So about 4.25%) **NOTE: Anything paid back will be deposited straight back into my 401(k), including interest**

Scenario: I would like to leverage this loan and invest into a 1) Syndication deal like a MultiFamily Apartment or 2) A Equity Fund that buys Commercials Multi Family RE. 

Let's pretend both 1 & 2 have industry average returns of 7% (Cash on Cash) and Preferred Return of 14% over 5 years. 

A $50K Investment would provide:

• $3,500/Annual CoC, $291/Mo CoC
• $17,500 return in 5 years through CoC alone
• $4,000 + return of capital ($50,000) year 5
• Total Return is $71,500

A $50K Loan would cost:

• $868.41 Monthly installment taken out of paycheck over 60 months
• $10,421 Annual payback
• I will need to stay employed for the next 5 years at the same job

My thoughts: 

Obviously, the cash flow from the investment will not cover the loan installments. But the cash flow would be added to the balance sheet. I would be paying money out of my W-2 paycheck to re-pay my loan to myself in my 401(k), thereby adding to the balance sheet. 

At the end of 5 years, I would technically be $21,500 'richer' on the balance sheet due to the investment, as well as $50,000 added additionally to the balance sheet from repayment of the loan from my W-2.

I'm literally taking money out of a tax-advantaged account that I can't touch until retirement, without fee's and penalties, and using it to invest in cash flow assets that I will get back at the end of the investment period. 

My question is:

What am I missing? I'm sure there are tax advantages which are a given, but I can't help think this is something I should avoid doing. Technically, from a loan perspective, my cashflow would pay almost half the loan at $21,500, and my W2 would pick up the remainder. So the actual 'cost' to me is $577.41/mo & $34,644.6/total repayment after 5 years.

What are the disadvantages? 

Is my thinking/numbers correct? 

Anyone ever try something like this?

Looking forward to what others think. 

Thanks!

Yujin

Wow just eviction moratorium hurting you? I have a town saying I can't even rent my rental property. 

Thanks Country Club Hills, IL Mayor. 

https://chicago.cbslocal.com/2...

@Will Fraser, @Kevin Romines, 

Thank you both for insightful posts. 

I believe this clears this up for me. I didn't think of a HELOC as another way, to be honest.

When doing a refinance, do lenders ask about the rent roll? I was told that I need 6 months of solid rent before a lender will do a cash out refinance for a investment property. 

Hello BP!

Can anyone help me understand if my math/though process is correct:

I bought a rental property for $100,000 in 2018, with $25,000 down.

I got some comps from my PM recently and they are saying it can sell for $185,000.

I'm thinking about getting an appraisal done, and then refinancing 80% to pull $144,000 out. (Is this the right process?)

Is that the proper thought process? 

Getting an appraisal before going to a lender for a refinance, or should I just go to a lender to refinance and get an appraisal during the process. I can also just sell the property, hopefully for between $175,000 - $180,000 Pay back the mortgage, walk away with roughly $75,000 in profit (discounting the down payment)

Me ideal end goal would be to pull out as much cash from the new value of the property. How can I accomplish this? 

I get the BRRRR process, but something isn't 'clicking' for me to understand the refinance piece.

Who would provide the appraisal? The lender? Me? 

Any help is always appreciated!

Motivational! Love the post, and great insights! 

I remember reading the same thing about the Stock Market. A 30 year veteran in the stock market put it like this. 

"In a bull market, everyone's a genius"

I also feel I have seen a massive spike in Dropshipping/AmazonFBA/Day trading/Forex/Crypto guru's on my own feeds. *Shrugs*

People are stuck at home and trying new things. Then there are people trying to capitalize on those same people stuck at home and trying new things. Rinse, wash, repeat. They are always there, in every economic cycle. 

Where's my Amway/Herbalife reps at? Likewise, where's my "New System for Getting 1 MILLION DOLLARS from rentals in as little as 3 months"?

 Appreciate the response. 

After looking at it from all angles, I think I overreacted to the number versus what value is actually being put forth. 

I'm giving this rental another 2 years to turn around. All else fails, I'll sell out of it. 

The comforting thing is, the mortgage lender/real estate sites says the house has appreciated in value (close to $50,000), but that of course isn't based on anything real, like an appraisal. But I can at least feel a little better, right? :P

Appreciate the word -

The first PM was terrible, the current PM is a rockstar. 

Yea, COVID's been a PITA, especially this eviction moratorium. Can't be mad at forces I can't control. 

I wish I could, but I'm in the Middle East and travel to and from the States back to work is not ideal without causing some costlier mistakes. (time off work, 14 day quarantine with no pay, plane tickets, etc, etc)

The two biggest costs are:

1) Removing the rug, replacing with fake wood flooring. (about 6K)

2) Repainting the entire home, ceilings, walls, etc. (About $5K)

The rest are small electrical, cosmetic and few safety items. And removing trash from the property left by the tenant. 

I'm trying to look at this from a bigger picture - down the line perspective. I think I'll feel better once I get it rehabbed and get an appraisal done to see what the actual cost of the house is/could be.