When to jump into the R.E. investment market (real estate, credit)

[Big House]

Originally Posted by mr&mrssunshine

okmy 2c worth. i have been involved in construction/property for 30+ years, seen it go up seen it go down....but long term the trend is always up.

so take a 44g propety. the bank will want you to put down at least 20 if not 25%. lets say 25 or $11k
leaves you 33 to finance, that will cost around $2-250 a month.
add on insurance (you as owner need to cover the home not contents ) and taxes
make a repairs allowance.
see what that comes to a year

Most property investors like to see 5-7% as a return so on 44k lets say $2650 per year PROFIT. if you can do that AND be sure if you dont rent it that you can cover the payments , then I would say do it.
the real money maker can be in the capital growth. one day that 44k house will be worth more ,maybe a lot more.

so providing the payments wont kill you if you have to make them for a few months I would say go for it....where else you gonna get a return on your money these days ???A

oh and if you dont -let me know , I always know people interested in buying ( and remember I asked first before Big House !!!) :-)

It's not who gives the first advice - it the 'best advice' that counts grasshopper.

[QuilterChick]

Originally Posted by Messing About

Maybe I should just focus on paying my own house off in 15 years. We just refi'd for 30 at 3.75%.
I'll be 47 in September and something tells me we're going to be here for 15 years. I'm still not convinced this country isn't facing a complete economic collapse. This home is the only debt we have and that's a secure feeling*. Of course if there's a total financial meltdown, will my good credit even matter?

It is always good to have an optimistic, but cautious, outlook in any real estate market. The reasons for the collapse that caused this particular housing market are different than any other. People historically tend to get more optimistic approaching a presidential election period, no matter which party they want in the White House.

I'll go with the *secure feeling every time but that's just me; anything else in this current economy is a crap shoot. A good night's sleep trumps the unknown investment horizon every time unless you can afford the potential downside. No one knows the upside, ever, unless you've totally convinced yourself that there is only an upside and you can handle the stress of being a landlord.

[Harbor Hopper]

Originally Posted by DennisDaMenace

Personally given the current price of homes in Sw Florida. I wouldn't Hesitate to tap into my retirement plan to purchase real estate.

If I pulled 100k out of my retirement account and bought a house that I could rent out of 1200 a month. Right now, that 1200 is more than I make investing, with no appreciation on the house, I come out ahead.

Unfortunately, taking $100k out of a retirement acct will only NET you $70k after the 20% Federal tax and 10% early withdrawl penalty. That's $30k lost before you're even invested a dime of it. I would NOT recommend raiding a retirement acct, unless absolutely necessary to survive.

[mr&mrssunshine]

Originally Posted by Big House

It's not who gives the first advice - it the 'best advice' that counts grasshopper.

the best advice you give is 'drink more beer'

[wpc691]

Originally Posted by mr&mrssunshine

the best advice you give is 'drink more beer'

Now THERE'S some advice we can all agree on. LOL

[Messing About]

Originally Posted by DennisDaMenace

If I pulled 100k out of my retirement....Right now, that 1200 is more than I make investing

I wouldn't touch my 401k. My employer matches 25% weekly up to 6% of my gross...my elected fund was at 16% gains, YTD, until the latest slump. I'm still at 12% YTD. Can't get that anywhere, legal anyways, that I know of.

[DennisDaMenace]

Originally Posted by Harbor Hopper

Unfortunately, taking $100k out of a retirement acct will only NET you $70k after the 20% Federal tax and 10% early withdrawl penalty. That's $30k lost before you're even invested a dime of it. I would NOT recommend raiding a retirement acct, unless absolutely necessary to survive.

Perhaps I am wrong about this, but I believe that you can use funds from a self directed retirement account to invest in RE without penalty. I'm not a realtor or financial advisor, so I may not be correct, but that's what I heard.

[Harbor Hopper]

Originally Posted by DennisDaMenace

Perhaps I am wrong about this, but I believe that you can use funds from a self directed retirement account to invest in RE without penalty. I'm not a realtor or financial advisor, so I may not be correct, but that's what I heard.

Nope, not if it is a pre-tax retirement acct. The ONLY early withdrawl they allow without the 10% penalty is a "hardship" withdrawl, in which you have to prove that you have no income and absolutely no other assets remaining to cash out.

[wpc691]

Most 401k plans will have some kind of loan provisions for defined hardship, like medical expenses or purchase of a primary residence. There's no penalty, but it has to be approved by the trustees, and paid back (to yourself, of course).

[QuilterChick]

How to Use a Self-Directed IRA to Buy Real Estate | Fox Business


There are some creative methods, according to the above article, to use a Roth IRA or a self directed IRA. But that is a subject for a professional financial advisor who is very savvy on the risk.

Who could possibly be impulsive enough to risk their IRA in this economy? or even think about the risk. Why not just use the 60-day IRA replacement rule, take the money to Las Vegas and put it all on the crap table and let 'er roll. Makes about as much sense. If you win, you can put it back within 60 days. If you lose, er, uh, well you couldn't do that. I guess you could cry "wee, wee, wee" all the way home.