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Answers (18)
- Derek Zasaretti, "Derek_Zasaretti"
- Contributions:343
Yes, there are. When the market goes back up and it will , the $15000 houses will be worth a little more than that. The bottom line is there has never been a better time to buy real estate. Go back and pick any decade. When prices were low , you had high interest rates. When the rates lowered , prices were sky high. Now you have both , low interest rates and low prices. Retirement funds are secure? Look at Social Security, the Postal Service stopped contributing matching funds, Police and Fire pensions are in trouble all over. All based on a Ponzi scheme but legal. Everyday on the news , rising costs of retirement benefits. And wait jobs are outsourced so there are no new jobs , and the current ones are being held on by a string.
There is no for sure thing in life. When the bottom dropped out, I lost half of my 401k and I'm not the only person in this country that this happened to. O but wait , I made up for it with a $4000 house , that paid $6000 a year for the past 3 years and it's still going. Paid out better than my 401k.
There is no for sure thing in life. When the bottom dropped out, I lost half of my 401k and I'm not the only person in this country that this happened to. O but wait , I made up for it with a $4000 house , that paid $6000 a year for the past 3 years and it's still going. Paid out better than my 401k.
- sunnyview
- Contributions:25139
Dead chickens are unpleasant and should be avoided. Using a self directed IRA is a way to avoid penalties, but begs the question whether putting a majority of retirement savings into real estate is a good idea. Many realtors would say yes, many lenders might say the same, a financial planner may think otherwise depending on your holdings.
Any good advisor would encourage you to split your risk and not put all your eggs in one financial basket. In many situations (and of course depending on when they bought/what they paid), many people already have some risk in real estate in their portfolio mid life just with their primary residence. Markets cycle so you have to think about spreading the risk across more than one category, not magnifying it.
Any good advisor would encourage you to split your risk and not put all your eggs in one financial basket. In many situations (and of course depending on when they bought/what they paid), many people already have some risk in real estate in their portfolio mid life just with their primary residence. Markets cycle so you have to think about spreading the risk across more than one category, not magnifying it.
- Deborah Garvin, "loanmonarch"
- Contributions:438
The question is pretty old, but there are so many answers going in so many directions I just have to comment. Congratulations of Suzette for giving the only fully correct answer in the thread. Self directed IRA's CAN be a solid solution for your question. I would recommend a two step process: Talk with a mortgage professional to determine a solid price point for at least even cash flow (rent = mortgage payment, taxes and insurance). Get a complete breakdown of your options. Then take that information to a financial planner or CPA and get their opinion on whether or not it makes sense for you.
Asking a mortgage consultant or a real estate agent if it is a good idea to buy will rarely conjur up many negative opinions, to be sure. Kind of like putting a fox in charge of the hen house...you run the risk of a few dead chickens.
Asking a mortgage consultant or a real estate agent if it is a good idea to buy will rarely conjur up many negative opinions, to be sure. Kind of like putting a fox in charge of the hen house...you run the risk of a few dead chickens.
- Suzette West, "worldwesteba"
- Contributions:1
Hi Celvis,
There is a thing called a "self-directed" IRA. It is a type of retirement account that allows an investor to invest in alternative assets like real estate. A qualified professional can provide you with more details about this.
Here are a couple of things I have learned about these types of retirement accounts:
1. People can use their Self-Directed IRA to invest in real estate for rental income, or make real estate loans to earn interest income. All income earned from rentals and mortgage payments made must flow back into the self-directed IRA.
2. People are not penalized for using the money as long as it conforms to the strict guidlines that govern self-directed IRA's and how they must be structured.
Here is an interesting article from an article I found that explains self-directed Real Estate IRA's a little more:
http://www.selfdirectedir ... state-ira
Great question!
There is a thing called a "self-directed" IRA. It is a type of retirement account that allows an investor to invest in alternative assets like real estate. A qualified professional can provide you with more details about this.
Here are a couple of things I have learned about these types of retirement accounts:
1. People can use their Self-Directed IRA to invest in real estate for rental income, or make real estate loans to earn interest income. All income earned from rentals and mortgage payments made must flow back into the self-directed IRA.
2. People are not penalized for using the money as long as it conforms to the strict guidlines that govern self-directed IRA's and how they must be structured.
Here is an interesting article from an article I found that explains self-directed Real Estate IRA's a little more:
http://www.selfdirectedir ... state-ira
Great question!
- shasta_steve
- Contributions:448
"There are decent properties in my area going for 15k or less"
One thing is for sure, the people managing your 401k will need somewhere to stay after daytrading and happy hour
I am pretty sure most of the people managing my 401k or IRA are not living in a 15k house.
Now lets break this down. If someone withdraws money from their 401k for an investment property they will automatically get a 10% penalty and in the original, very old post, they would also have to pay an additional 2.5% penalty to the State of California. They would then have to pay anywhere from about 20% to 35% in income taxes to the feds and state. Most likely 35% because they have to throw that money right on top. They would be very close to losing 48% or more of their investment before they even started. They would then have to pay a couple of percent to actually buy the house and probably another 8% to sell it in real estate fees and other expenses.
Now I do not know about you but if I know I am going to lose 58% of my investment, right out of the gate, I might have to give that one a pass. I would also have to question anyones motives or intelligence if they told me it was a good idea.
One thing is for sure, the people managing your 401k will need somewhere to stay after daytrading and happy hour
I am pretty sure most of the people managing my 401k or IRA are not living in a 15k house.
Now lets break this down. If someone withdraws money from their 401k for an investment property they will automatically get a 10% penalty and in the original, very old post, they would also have to pay an additional 2.5% penalty to the State of California. They would then have to pay anywhere from about 20% to 35% in income taxes to the feds and state. Most likely 35% because they have to throw that money right on top. They would be very close to losing 48% or more of their investment before they even started. They would then have to pay a couple of percent to actually buy the house and probably another 8% to sell it in real estate fees and other expenses.
Now I do not know about you but if I know I am going to lose 58% of my investment, right out of the gate, I might have to give that one a pass. I would also have to question anyones motives or intelligence if they told me it was a good idea.
- Derek Zasaretti, "Derek_Zasaretti"
- Contributions:343
If you can find a good low priced cash deal, a partial pull may work. I wouldn't go full monty. Property prices in different areas may benefit some more than others. There are decent properties in my area going for 15k and less. Long distance property can and will be a headache. Management company or not.
401k is an investment based on buying low and trying to get the best return.
The same formula works in real estate. Buy low , get a decent return , ride the wave and then sell for profit.
One thing is for sure, the people managing your 401k will need somewhere to stay after daytrading and happy hour.
401k is an investment based on buying low and trying to get the best return.
The same formula works in real estate. Buy low , get a decent return , ride the wave and then sell for profit.
One thing is for sure, the people managing your 401k will need somewhere to stay after daytrading and happy hour.
- sunnyview
- Contributions:25139
No, it is not unless you are very experienced in real estate with a track record of success, have a rich relative that plans to die and leave you a comfortable retirement so you don't need your 401K for retirement or you plan to buy a cash flow positive 4-plex and live in one unit letting the other tenants pay your rent and maintenance.
Please rethink this plan. It is dangerous and there is no way to put the money back into growth once you pull it out. Penalties for your 401K withdrawal is also something to think about.
Please rethink this plan. It is dangerous and there is no way to put the money back into growth once you pull it out. Penalties for your 401K withdrawal is also something to think about.
- Craig 4321, "Craig4321"
- Contributions:87
This question is coming up all too often in this market. Speak with a qualified CPA and/or financial professional regarding the investment you want to make into Apple Valley California real estate.
- Alan Grizzle, "Alan Grizzle"
- Contributions:401
There are companies that let you hold real estate in a 401K. Here is a link to one of them http://www.trustetc.com/. All the money for repairs, taxes, insurance and everything must come from the 401K. All rent money must go directly into the 401K. If you go that route you will not have the tax penalites of withdrawing the 401K. I suggest the rental property be where you can keep a eye on it.
- Kevin Almeida, "Kevin Almeida"
- Contributions:13
It really depends on purchase price & down payment. Also, if you can leverage your rental income to cover your mortgage (assuming there is one). But I still dont think it would be the best decision to use all your 401k/retirement
- Doug Walker, "Churchill VP"
- Contributions:6
I can't disagree with anyone's advice here.
- It's rarely a good idea to put all your money into one asset, especially one as volatile as real estate has been lately.
- 401k distributions usually incur penalties, unless you are eligible to withdraw without penalty (but you probably knew that).
- To be a landlord, you almost have to know how to repair certain aspects of the home, or you could have a real nightmare scenario ahead of you. Most people only look at the cash flow coming in - not the cost of maintenance. And let's not forget the months when you don't have a renter.
Get some good information about the Cons of being a landlord befor eyou make this kind of a jump. And keep in mind the reality that your home may depreciate in value.
Take care.
Doug Walker - www.churchillmortgage.com
- It's rarely a good idea to put all your money into one asset, especially one as volatile as real estate has been lately.
- 401k distributions usually incur penalties, unless you are eligible to withdraw without penalty (but you probably knew that).
- To be a landlord, you almost have to know how to repair certain aspects of the home, or you could have a real nightmare scenario ahead of you. Most people only look at the cash flow coming in - not the cost of maintenance. And let's not forget the months when you don't have a renter.
Get some good information about the Cons of being a landlord befor eyou make this kind of a jump. And keep in mind the reality that your home may depreciate in value.
Take care.
Doug Walker - www.churchillmortgage.com
- Castellucci Laura, "SouthJerseyHomes"
- Contributions:16
That's a good question for Suzie Orman, I would ask a Realtor that question, of course they would say...yes. Ask an accountant or financial advisor.
- John Souerbry, "John Souerbry"
- Contributions:67
I agree with most of the previous responses - this is not a question an agent can answer. Better to speak with a financial planner.
- Belinda Singh, "westcoastrealtor"
- Contributions:182
It all depends! The question is too broad, the information is insufficient. Are you 70 years old and looking to put all your money into a rental house to generate your only source of income? Or, are you 21 with $2500 in your 401k looking to dabble in real estate just to get your feet wet? There are many, many factors that should go into making a decision about purchasing real estate. It is not terribly liquid right now! Consult a professional and provide as much information as possible.
- Dan, "the_country_hick"
- Contributions:4699
That is as good an idea as putting all of you money into any commodity. IF you get lucky and that commodity goes up in value you do good. BUT if instead that commodity loses value you are at great risk of losing far more than you can afford.
You should never put all of your money into anything (except maybe a FDIC insured bank) that could lose value. If it loses value you risk everything you worked hard to save up. You should be very careful in what you choose as an investment vehicle. Real estate has to increase by at least 10% just for you to break even. Add up the realtor fees and closing costs it could be more.
You have no idea how renting works. You have no idea what the vacancy rate is. You have no idea how to screen tenants. You have no idea that you need at least a 30% rental price above your PITI costs to be a decent investment.
One simple word of advice here. NEVER put all of your money into any investment you do not understand exactly how it works and what it does. I do not care if that is buying gold, silver, oil, or wheat. Do not get involved in a market unless and until you really understand exactly how it works and what is going to push the market up or down.
Perhaps looking at the 3 links below will be of help.
Peter Schiff: Here's Why Home Prices Have To Decline At Least 20% And Probably More
Even the federal reserve is saying house prices are to high and need to drop more.
The Fallacy of a Pain-Free Path to a Healthy Housing Market - Economic Letter, December 2010 - FRB Dallas
Here is a graph of house prices over time. Take a hard look.
Do you know what the housing bubble really looks like? ... - Zillow Real Estate Advice
You should never put all of your money into anything (except maybe a FDIC insured bank) that could lose value. If it loses value you risk everything you worked hard to save up. You should be very careful in what you choose as an investment vehicle. Real estate has to increase by at least 10% just for you to break even. Add up the realtor fees and closing costs it could be more.
You have no idea how renting works. You have no idea what the vacancy rate is. You have no idea how to screen tenants. You have no idea that you need at least a 30% rental price above your PITI costs to be a decent investment.
One simple word of advice here. NEVER put all of your money into any investment you do not understand exactly how it works and what it does. I do not care if that is buying gold, silver, oil, or wheat. Do not get involved in a market unless and until you really understand exactly how it works and what is going to push the market up or down.
Perhaps looking at the 3 links below will be of help.
Peter Schiff: Here's Why Home Prices Have To Decline At Least 20% And Probably More
Even the federal reserve is saying house prices are to high and need to drop more.
The Fallacy of a Pain-Free Path to a Healthy Housing Market - Economic Letter, December 2010 - FRB Dallas
Here is a graph of house prices over time. Take a hard look.
Do you know what the housing bubble really looks like? ... - Zillow Real Estate Advice
- Jerry Current
- Contributions:210
Your entire 401K! My gut reaction is no. Investing is all about diversification. Ask your financial advisor.
- JoEllen Ufner - ABR,GRI,SFR, "jufner"
- Contributions:397
Please ask your accountant as they can best advise you...best of luck
- Ofe Polack, "Ofe Polack"
- Contributions:1418
Thanks for your question, unfortunately it would not be fair to give you an answer since we do not know what the rest of your investment portfolio is like, nor do we know your income and the rest of your financial picture. I suggest that you discuss this idea with either a lender or an accountant, or better yet with a financial consultant. The very best of luck!
Is it a good idea to use your entire 401k to buy an investment home and rent it out?
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