Investor insight please.

[svivian]

Still gotta manage the manager. Most of my clients own millions in investment RE. Even with a PM in place, it’s far from passive, especially when considering the mental stress load.

I’m glad your way works for you. So does securities investing in retirement accounts too.

Get a better PM... Just like alot of financial advisors who you have to stay on top of to make sure they are doing the best for you.

Or the GC whose building your house

or the painter

The quality advisors I know and work with, are not taking additional business as they have too many clients as is. They are a quality over quantity operation. Ive met with way too many eager advisors looking for business.

Nothing wrong with the OP learning some things before going into a potential conversation with a planner. Too many go in blind and trust the "professional".

everyones financial path isnt the same, and finding the right one that fits your risk appetite and personality takes some exploring from what ive seen. I work with successful clients every day and learn something different from all of them. End of the day there is a lot of ways to skin a cat.

 

[KsRancher]

If you didn’t know the 401k carries a rule of 55 provision that basically states when you separate from your last employment that holds your 401k and you leave it there, you may draw on it penalty free prior to 59.5.

Thank you for posting this. I had no idea. Going to be leaving my place of employment in a month. Going to look into this. Edward Jones told me that there would be a penalty if I withdraw before 59.5

 

[Hydra6]

Is retirement account investing the optimum approach for fellas like OP trying to retire as quickly as possible? Or for average Joe who wants to work until 59.5?

I've yet to meet anyone independently wealthy in their 40s who did it with a 401k or Roth, just saying. I've met a bunch of folks who did it with RE.

How many people tried to become wealthy with real estate and it did not work out? I hear about the "winners" in real estate, crypto, gambling, day trading, and so on - I seldom hear about those that "lose" with these approaches.

 

[ianpadron]

How many people tried to become wealthy with real estate and it did not work out? I hear about the "winners" in real estate, crypto, gambling, day trading, and so on - I seldom hear about those that "lose" with these approaches.

Probably a lot...? Doubt many of them were calculated with their approach though.

Lumping RE in with crypto, gambling, day trading etc. is disingenuous imo.

Speculation exists to a degree everywhere, and the more you know about an asset class, the less likely you are of losing your shorts. It's my opinion that the fundamentals behind REI are relatively simple to learn and easy to follow.

Ultimately you've got to pick a couple investment strategies to get proficient in or pay someone who is, or you get left in the dust. All of them have risk...

Are you aware of a 100% safe-bet to build wealth?

 

[CO Mountain Man]

After reading through this thread here are my takeaways:

1. Invest hardcore in RE if it was before 2020 when COVID screwed over desirable locations in the Mountain West or subsequently in 2022 when interest rates skyrocketed and now it requires creative accounting to make RE investments pencil out…

2. Invest in crypto before it was expensive…

3. Everyone wants financial advice but doesn’t want to pay to receive actuality sound advice from professionals who more than likely know more than the internet unlicensed financial warriors who are expounding their expertise on a hunting forum…

4. To the OP, keep up the good work with your investing. You are ahead of most people.

 

[CorbLand]

After reading through this thread here are my takeaways:

1. Invest hardcore in RE if it was before 2020 when COVID screwed over desirable locations in the Mountain West or subsequently in 2022 when interest rates skyrocketed and now it requires creative accounting to make RE investments pencil out…

2. Invest in crypto before it was expensive…

3. Everyone wants financial advice but doesn’t want to pay to receive actuality sound advice from professionals who more than likely know more than the internet unlicensed financial warriors who are expounding their expertise on a hunting forum…

4. To the OP, keep up the good work with your investing. You are ahead of most people.

He is a year older than I am and has about 10X what I have in my retirement. I would say he is a few laps ahead of most people. Especially when you add his age into the equation.

 

[Hnthrdr]

Going to lay out a typical scenario I help high earning clients through in the real estate world:

Let's assume you're pumping $23k a year into a 401k like OP.

Instead of 401k jail, let's explore the world of real estate investing...and save that cash for a down-payment on some cash flowing property.

After 1 year, you've got $23k, 2 years, $46k, 3 years $69k, of earmarked down-payment money.

$23k will get you a run of the mill single fam in the Midwest that will cashflow a couple hundred bucks a month, but not appreciate much above inflation. Good long term play, the VTIX of the real estate world, set n forget.

$69k gets you into some pretty superb markets where DSCR loan products or conventional mortgages will work on a variety of small multi-fam, STRs, etc...with higher cash flow AND appreciation.

So you've parked some cash, spending a little to leverage a lot...and you've got someone else paying off your debt, while you enjoy the tax benefits and appreciation.

After a decade, or another big market jump, you decide you want to refinance a few of your properties and pull some cash from your equity position to buy more real estate, upgrade your primary, book that 50k sheep hunt, etc .

Guess what you pay in taxes on that cash out refi? Zero. Guess who pays the interest on that cash? Your tenants.

Or you have a big year at your W2 job and don't want your bonus check to go to Hunter Bidens hooker n blow addiction. Park some cash in a cheap property, claim bonus depreciation year one, and pay ZERO in taxes.

Down the road you've fully depreciated a property and need some more tax sheltering...so you locate a larger property with higher cash flow...and 1031 exchange into it.

Guess how much you pay in taxes? Zero. Guess how much your kids will pay when they inherit it? Zero.

I hope this basic illustration opens guys eyes.

Yes real estate involves occasionally costly repairs, humans being humans, etc....but the benefits are unrivaled in terms of combining cash flow and tax advantages that you can use today, and estate planning and wealth building for tomorrow.

Thanks for coming to my TED Talk.

For guys looking to buy real estate to make $$$, I've got connections all around the country that speak the language and can get you dialed in. A GOOD agent is just as valuable as a GOOD wealth manager, they'll make you way more than they'll cost you.

I agree with this… but rentals, even cash flowing ones, have to be managed and are not totally passive and take time. I have a couple and they are great, until they are not. If I don’t want my money pot getting sucked dry by contractors it’s me doing the work, which is fine I have the time, but it tends to always be something haha time or money

 

[CO Mountain Man]

He is a year older than I am and has about 10X what I have in my retirement. I would say he is a few laps ahead of most people. Especially when you add his age into the equation.

I agree. I was mostly referring to the commenters. The OP is ahead of the game for sure.

 

[rvalleyp]

Can't really think of anything more passive than hiring a property manager at 6% to handle everything at all hours and mail you a check every month.

Note that the combination I mentioned above included lots of $$$ in an indexed brokerage account...as close to cash as you can get.

I have researched investing in short-term rentals, but the numbers don't seem to add up. I am interested in a property that would generate positive cash flow, considering the current interest rates and a 6% management fee.

 

[Marshfly]

I have researched investing in short-term rentals, but the numbers don't seem to add up. I am interested in a property that would generate positive cash flow, considering the current interest rates and a 6% management fee.

You don't buy real estate for cash flow. If it cash flows well, that's a bonus. Real Estate investing is best thought of as a tool for wealth building and for tax advantages. At least that's my takeaway.

That said, I do not invest in real estate currently. That's too hands on for me and the returns don't interest me for my current stage of life. I am too busy reinvesting profits in my two current businesses to rapidly grow those. I do have eyes on it in the near term future for tax purposes though.

 

[Afhunter1]

I have a few rentals. Def not hands off but my experience has been positive so far. I’m looking to buy another in a beach town soon for family use/income. All mine have a positive cash flow. I have lower interest rates than what is currently being offered in the commercial market.

 

[Marshfly]

I have a few rentals. Def not hands off but my experience has been positive so far. I’m looking to buy another in a beach town soon for family use/income. All mine have a positive cash flow. I have lower interest rates than what is currently being offered in the commercial market.

Figure in current rates and subtract paying yourself a fair wage and things get slim cashflow wise.

I know some people do not count their time in the mix but I do for everything. What it would cost to replace my work comes off the top before I calculate any returns for everything I do.

 

[ianpadron]

You don't buy real estate for cash flow. If it cash flows well, that's a bonus. Real Estate investing is best thought of as a tool for wealth building and for tax advantages. At least that's my takeaway.

That said, I do not invest in real estate currently. That's too hands on for me and the returns don't interest me for my current stage of life. I am too busy reinvesting profits in my two current businesses to rapidly grow those. I do have eyes on it in the near term future for tax purposes though.

Totally depends on the market and property type.

A little creativity goes a long way.

There are guys/gals killing it in the current high interest rate environment by signing long term leases with sober living companies. The cashflow is insane compared to sfr for the same exact home.

Chat with a couple "high-end" trailer park operators about their numbers...also insane.

Real estate is a much more diverse asset class than most people think.

 

[ianpadron]

Figure in current rates and subtract paying yourself a fair wage and things get slim cashflow wise.

I know some people do not count their time in the mix but I do for everything. What it would cost to replace my work comes off the top before I calculate any returns for everything I do.

Time is big. Fortunately if you spend enough time in RE the tax benefits get larger as you can qualify for RE professional tax status.

More write offs than you can imagine!

 

[Hydra6]

Are you aware of a 100% safe-bet to build wealth?

Maybe not wealth - but serving in the National Guard for 20 to 30 years then retiring thereby drawing a significant pension at age 60 plus medical benefits for you and your family is the foundation of my retirement plan. Simultaneously I worked in the paper industry for 30 years maxing out 401Ks plus the government TSP. Retired at 61. The National Guard pension plus medical is a great foundation for retirement - downside is working a lot of weekends, lots of summers, and occasional wars (mobilize every 3-4 years since 9/11).

 

[ianpadron]

I have researched investing in short-term rentals, but the numbers don't seem to add up. I am interested in a property that would generate positive cash flow, considering the current interest rates and a 6% management fee.

STRs were the flavor of the week the past 5 years for sure.

I'm in an STR heavy market, and between saturation and local municipalities cracking down on permits, there are a lot more moving parts to factor in than in 2020 when money was dirt cheap, competition was non-existent, and profits were all-time.

That said, it's been wild to see folks pivot into "experience" based niches like glamping. There are wall tent operations here grossing more than high end mountain retreats at the ski resort. Some of them don't even own the dirt, they lease from a landowner and profit-share.

All that to say there will ALWAYS be ways to squeeze cash flow out of RE for those willing to hustle.

99% of hate thrown at REI is from folks who aren't in/around REI. Such a diverse asset class compared to what folks traditionally think of.

 

[Article 4]

Does your place of work offer 401k Roth? I max out my 401k as well and it is all Roth. The company match is traditional, but if I play my cards right at time to take withdrawals, that should be very low tax rate too.

Typically, deferring taxes is a beneficial thing imo. Now if you want to diversify and buy real estate, I would say do not make out your 401k and set money aside for real estate.

Roths are great but have income limits - if you are already invested at work, you may be able to change your selection for next year...depending on your income. Its 146 and 161 for single income earners. Married filing jointly is 230

Diversification is always a good idea and real estate is a great add. Perhaps not in Cali....as the laws there are prohibitive but if you want the risk, do it.

Diversifying taxes at retirement is crucial - you want some $$$ in all the buckets. Taxed, Tax deferred, and tax free - yes there is a tax free bucket

 

[RC_]

I’ll add to the conversation. For those that do decide to max out your 401k and are able to swing it from a cash flow perspective, max that sucker out as early in the year as possible. I’d have to track down the studies but it has been proven that over the long-term returns are materially higher when invested for that whole year rather contributing equally each month.

Some employers write their matching provisions in a way that you could lose out on full match doing this so read your plans language carefully and make sure that you’re not leaving dollars on the table before considering changing how you contribute.

 

[HuntHarder]

Roths are great but have income limits - if you are already invested at work, you may be able to change your selection for next year...depending on your income. Its 146 and 161 for single income earners. Married filing jointly is 230

Diversification is always a good idea and real estate is a great add. Perhaps not in Cali....as the laws there are prohibitive but if you want the risk, do it.

Diversifying taxes at retirement is crucial - you want some $$$ in all the buckets. Taxed, Tax deferred, and tax free - yes there is a tax free bucket

No income limits on Roth 401k.

 

[Article 4]

No income limits on Roth 401k.

For employer plans, no - for individual Roth contributions there are:

The income limits for Roth IRA contributions in 2024 are as follows:

• Single filers
  Modified adjusted gross income (MAGI) must be less than $146,000 to contribute the full amount. If your MAGI is between $146,000 and $161,000, you can contribute a partial amount. If your MAGI is $161,000 or more, you can't contribute at all.
  
  
  
• Married filing jointly
  MAGI must be less than $230,000 to contribute the full amount. If your MAGI is between $230,000 and $240,000, you can contribute a partial amount. If your MAGI is $240,000 or more, you can't contribute at all.
  
  
  
• Married filing separately
  If you lived with your spouse at any time during the year, you can't contribute if your MAGI is more than $10,000.
  
  

The maximum contribution limit for a Roth IRA in 2024 is $7,000 for those under 50 and $8,000 for those 50 and older.