Ask The Guys – 401ks, Losing Properties, and Preparing for a Bust

That’s right. It’s another episode of our favorite topics from our favorites guests … YOU!

It’s time for another segment of Ask The Guys … and we’re ready to tackle the tough questions. 

We’re touching on 401ks, purging portfolios of problem properties, and how to prepare for what many believe is an inevitable bust. 

And … there’s more!

The best way to learn is from each other. 

Remember … we aren’t tax advisors or legal professionals. We give ideas and information … NOT advice. 

In this episode of The Real Estate Guys™ show, hear from:

  • Your succeed-or-bust host, Robert Helms
  • His bust-a-gut co-host, Russell Gray

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401k sitting idle

Our first question is from Lenedia in Forney, Texas. She says she has about $16,000 left in an old 401k plan that’s just sitting idle. 

She wants to invest this money in real estate or in another niche that would give her a profit within a year … but she wants to know our advice for a first time investor. 

Well, we don’t give advice … but we are happy to share ideas. 

The duration of the investment is always an important factor. When you’re looking for a return in a short period of time … it limits the things you can invest in. 

When you’re using retirement savings … there are some rules and some risks. 

The best thing you can do as a first time investor is get educated. Invest in investment. The good news is that it doesn’t cost that much. 

In this particular case, you’ll want to learn about 401k plans and how they dictate what you can invest in. 

Maybe you’re at a point in your life where it’s time to start taking distributions from retirement. In that case, you may make different choices about where you invest the money. 

One of the big advantages of retirement account investing is that it isn’t subject to the same taxation.

But again … the most important thing you can do is educate yourself on all the options before you make a decision. 

What to do with non-performing properties

Christopher in Anchorage, Alaska, started purchasing multi family real estate in 2013. Currently, he’s sitting on two unfinished, non-performing properties.

Christopher says he either needs to find a buyer that wants to finish the properties … or an investor willing to front the funds so they can be finished and flipped for a cash out. 

What have we seen in these types of situations?

The real essence of the question is, “How do you get rid of a property you don’t want?”

Anytime you’re looking at an investment decision, you’re looking at its current condition. Whatever it is … it’s worth something in its current state. 

That worth is your baseline. Then, you look at what the potential of the property is … and what it is going to take to bridge the gap between where it is and its potential. 

If you can bridge that gap and make a profit … it may be an opportunity … but it still might not be the opportunity for YOU. 

Have other investors in your life come and look at the property and the market and ask them what they think the opportunity may be. They may see an opportunity that you don’t … or they may want to take it on themselves. 

Either way, it’s time to take a look at how the properties got this way to begin with. Why did this project croak on your watch?

Use it as a learning opportunity … and if you decide to take on the project yourself, you’ll need to be able to explain what happened to other investors. 

When you take the property to market … you may just decide it is best to take a loss on it and move on. Nobody gets through this business clean. 

Extra billions and the bust 

Jason in Merrick, New York, wants to know if we see the recent creation of billions of dollars pumped into the banking system having an impact on real estate. 

In the U.S. and many other countries, there is what we would term quantitative easing … printing money and creating billions of dollars out of thin air. 

Of course, there are ramifications. And there are a couple of things to think about. 

Lots of this capital gets into the system, and it doesn’t get back out again. That’s how it stays contained. 

People have access to the capital through whatever means bid up the assets that are in demand. 

That being said, there’s a lot of motivation on a lot of people’s parts to prop up real estate … because bankers make loans against real estate.

If those loans go bad … if real estate prices drop … the voters that live in those homes get angry at politicians. 

Some politicians are very motivated … that’s why you see a lot of effort to create subsidized financings and easing lending guidelines. 

All that to say that historically, more money being pumped into the system is good for real estate in the long term. 

Sometimes, it does create major disruptions in the credit markets. When that happens, credit markets dry up like they did in 2008 … and that has a negative impact on real estate prices.  

But, if you’re a cash flow investor and you’re controlling your real estate with prudent cash flows and long term structured debt that isn’t going to be called … you can ride that wave out. 

If prices were to crash again, we think it would be fair to expect that the powers that be will do exactly what they did last time … funnel lots of money into real estate until they can re-inflate. 

So, there are a lot of maybes and what ifs … but generally, real estate is the winner when there is more money floating around in the system. 

More Ask The Guys

Listen to the full episode for more questions and answers. 

Have a real estate investing question? Let us know!  Your question could be featured in our next Ask The Guys episode.

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