It is unlikely that you will be able to use 401(k) funds to invest in real estate because you are constrained to the choices available by your plan administrator.

Hope this helps.

Why everytime a deal is being exposed, it never considers the unrealized/realized costs, if we are talking in terms of unrealized gains? I think those are typical fees/costs associated for any new investor, and we need to be aware of those if we want more control of your money.

DO you think those costs are conservatively or typical for a new investor?

What do you consider the “right price” the expected/unrealized equity capture, especially in the current market conditions?

And how are you going to deal with timming issue when you have the properties on lease?

What do you think prevent from people to get the expected unrealized equity capture “today”? the right price is not what is expected? timming? market conditions? no tax depreciation benefits? current lending-appraisal conditions?

I think from what Im underestand the equity capture can make you rich fast not the cash flow.

Alfonso:

“Would you spend a dime to make two dollars?”

Lets have an example so I can underestand what to expect in a typical deal:

70k price (including repairs)
100k (comparable sales)

costs:
7k = 6% fees (sales commissions + closing cost) based on 100k
2k = 3% closing costs when you buy and refi, etc (depend on the finance program used) based on 65k price, this cost is usually rolled up in the mortgage so you pay that later.

total costs about 10k

unrealized gains = 20k instead of 30k, still is good money, but its not the ratio 1:20 you describe.

Sorry If I ask too many questions, but Im trying to have a the whole picture, so I can set my expectations accordingly.

Thank you again,

Again, fees are just the cost of doing business. They are like death and taxes, you can’t avoid them. But remember, if you’re buying a property at 25%-40% below market value then DO NOT let $3K in fees stop you from capturing $20K in equity. Would you spend a dime to make two dollars?

As for liquidity, you’re right. Real estate is not a liquid investment. But as I stated, as long as you are earning positive cash flow then do not worry about selling. Of course if something happens and you need to sell then be prepared to face the possibility that you will not be able to liquidate in a hurry.

Buy below market value. That’s the strong point I would make here. That way if you have to sell in a hurry, or if the market turns against you, or if you have lots of fees, or if you cannot rent the property out in a hurry, then you have that inherent hedge built in.

Hope this helps.

I think people will be more willing to take actions knowing realistic espectations with typical deals (providing “typical” profits and risks involved)

Please take the route of help, illustrating us how to overcome those obstacles and fears, please take hard and soft questions with the same enthusiams as a public speaker, you are the expert, people usually make questions based on their believes (or misconceptions).

From your response above I found only one good sugestion “Minimize your costs by calling different lenders and compare expenses”.

And please show me how good is real estate investing not saying 401k/stock are bad, please bring your energy to shine those grey points we may have.

Thank you,
Alice.

Alice, whether you buy at a 25% discount or 1% discount, right now it is not easy to buy with zero dollars out of pocket, but that was never mentioned in the article because the article is about keeping control of your money, not buying real estate with no money down, or property management.

Also, it is true that you pay fees when you both buy and sell property. That’s the cost of doing business. You’ll also pay fees to trade stocks. Minimize your costs by calling different lenders and compare expenses. My first property purchase was done w/o a realtor. The seller didn’t pay 6% commission. You cannot let a $1,000 fee stop you from capturing $20,000 in equity.

Lastly, you are right that the small cash flow from a single family home will not make you rich. But if you put $5K into a deal and make $250 a month in positive cash flow that is a much greater return than you will get putting $5K into your 401(k), which will net you $0 a month. Plus, when you combine the cash flow, the equity capture, and the tax benefits of a few single family houses, now you are talking about a good chunck of money.

Thanks again for the feedback. Have a great day.

Remember We are hungry to know how to succeed in real estate!!!

For a type A of person maybe its too much, they wont read the whole article.

For a type B, some of the real estate’s financial topics weren’t exposed (low liquidity, market exposure, future expectatition, transaction fees, etc, the big picture! With out mention the operational topics).

And remember cash flow wont make you rich in real estate (at least at the single family level). But You can have more control of your money, agree!

If the price drops 25% and you bought 25% discount, two things:

.- 25% discount wont be more likely a zero dollars out of pocket deal.

.- If You decide to sell for any reason, you still have to pay fees (3-6%) plus any price reduction to accelerate the sale and timining. And I forgot the fees when you bought it.

Remember We are hungry to know how to succeed in real estate!!! I think Exposing all those risks and myths will help us tremendously.

Good luck and looking forward to heard from you.

Alice