Stay with TSP or move out

Managing your TSP and alternate investment options after retirement or separation from service.

Moderator: Aitrus

m.eddy
Posts: 78
Joined: Mon Sep 19, 2011 1:48 am

Re: Stay with TSP or move out

Post by m.eddy »

Very interesting. I will throw another option in mix. This is not for everyone and there are a lot of moving parts involved but we each have our own path. I have been looking at this Roth TSP that they are talking about and will probably set that up. Off of our government retirements (TSP and Roth) I want to have two streams of income. I plan on cashing out the Traditional TSP to buy real estate using "earnest money" that will come from a Self Directed IRA. Yes, I know that will realize the taxes up front when I cash out but what I will be getting in return will recup that lose in a couple of years. This means the proceeds will be realized by the IRA and taxed as portfolio income versus by me and taxed as earned income. Someone once asked me would you rather pay taxs on the seed or the tree. That was easy to answer. There are a lot of ins and outs that have to be structured correctly to lessen your tax burden. You will need a good real estate attorney and a good CPA who knows real estate to do this for you. I completely agree that taxs are always going to be there. But why pay more than you have to.

There is another aspect that could be looked at using a Self Directed IRA. In Texas right now, investors are paying anywhere from 6% to 12% simple interest to use moneys from these IRAs for 3 to 4 months. You secure your money by structuring so that you are the "first" lien holder on that property. Do a couple of those a year and it is taxed as portfolio income.

Hard Money Lenders were once thought to be a dirty word because of banks smear campains but have become a mainstream source of short term funding. They are always looking for money for real estate investing. Traditionally they charge investors 14% to 18% simple interest for 3 to 4 months. They make a killing. You loan it to them at 18% to 20% simple interest annual and they will take it all day long. You will make money that is being taxed as portfolio income. Just some food for thought.

skiehawk11
Posts: 2116
Joined: Wed Jan 05, 2011 2:32 pm

Re: Stay with TSP or move out

Post by skiehawk11 »

m.eddy wrote:Very interesting. I will throw another option in mix. This is not for everyone and there are a lot of moving parts involved but we each have our own path. I have been looking at this Roth TSP that they are talking about and will probably set that up. Off of our government retirements (TSP and Roth) I want to have two streams of income. I plan on cashing out the Traditional TSP to buy real estate using "earnest money" that will come from a Self Directed IRA. Yes, I know that will realize the taxes up front when I cash out but what I will be getting in return will recup that lose in a couple of years. This means the proceeds will be realized by the IRA and taxed as portfolio income versus by me and taxed as earned income. Someone once asked me would you rather pay taxs on the seed or the tree. That was easy to answer. There are a lot of ins and outs that have to be structured correctly to lessen your tax burden. You will need a good real estate attorney and a good CPA who knows real estate to do this for you. I completely agree that taxs are always going to be there. But why pay more than you have to.

There is another aspect that could be looked at using a Self Directed IRA. In Texas right now, investors are paying anywhere from 6% to 12% simple interest to use moneys from these IRAs for 3 to 4 months. You secure your money by structuring so that you are the "first" lien holder on that property. Do a couple of those a year and it is taxed as portfolio income.

Hard Money Lenders were once thought to be a dirty word because of banks smear campains but have become a mainstream source of short term funding. They are always looking for money for real estate investing. Traditionally they charge investors 14% to 18% simple interest for 3 to 4 months. They make a killing. You loan it to them at 18% to 20% simple interest annual and they will take it all day long. You will make money that is being taxed as portfolio income. Just some food for thought.


This is new to me. Could you link some sources so I can research this?

I did a quick Google search and I got some shady looking sites promising tons of money fast. How much of a risk are you taking with your money? What is the success rate? Is there some sort of safety net? How much does one need to invest this way?

m.eddy
Posts: 78
Joined: Mon Sep 19, 2011 1:48 am

Re: Stay with TSP or move out

Post by m.eddy »

search "self directed ira" - equity trust and midatlantic are a couple of the companies. your money is secured because you hold the note/morgage on the property through your ira. they don't pay you get the property. hard money lenders always look at the property and do their own research. there are three in north texas that i will talk to. if they will not loan you the money then you did something wrong in your research and they will take you to school. don't get mad at them say thank you because they just saved you from a very expensive mistake. if the numbers work all three have the cash on hand to send it straight to the title company that day. they are expensive and that is why i prefer private money but i can call one of them on his personal cell phone to run the numbers and he will tell me if it is a deal that he would look at. 30+ yrs in real estate investing. sorry scrambling i go off duty in a few. rule of thumb that i work by, no more that 65% of arv (after repair value - what will it sell for in the current market) minus repairs. a wise invester once told me buy it right meaning as cheaply as possible. don't buy from someone who "wants" to sell, buy from someone who has to sell. following the these principles and only buying properties that someone can live in there is very low risk with a high return. got to go. shot me a private email for further.

m.eddy
Posts: 78
Joined: Mon Sep 19, 2011 1:48 am

Re: Stay with TSP or move out

Post by m.eddy »

Ok, at home now. You can search MIG Funding for a look at a national hard money lender. Emerald Dolphin Enterprises is a local hard money lender in my area. Funny name but if the numbers are right he will have the money to the title company in an hour. Hard money lenders do not want to take properties. It ties their money up so they can not lend to make more money. I am trying to answer your questions as I go. Your safety net on this is that you are the one holding the note and if the invester does not perform you get the property. The plus side to this is if you are loaning the money for four months and they turn/flip the property in in a month they are still paying you the same amount as if they had used it for the full four months. Now on the amount needed it depends on the market that you are in. My market is $75K to $125K ARV houses. That is what is selling and renting. Some investers will go as high as 70% of ARV. As I have posted on a couple of other forums, I am conservative, so I will try to get the property for 55% to 60% of ARV. I like to have an opps factor built in. That being said there are some of my counterparts that give the rest of us a bad name. Un-educated real estate agents and others will say that an investor is trying to steal your house when they make you an offer. What they do not tell everyone is that an investor is normally the last hope before the home owner loses the property (financial reasons) or is the only person that can buy the property because of federal lending regulations (issues with the structure concerning habitability; foundation, water, electric, horders). Yes, I was just in one of those. $%^&!!!! all of the aforementioned. Before anyone decides to go and jump into this business go to your local "real estate investment group/club" and talk to the invester that does the most business in that group. Get an education before you think about putting money at risk. I am more than willing to answer questions or give help.

m.eddy
Posts: 78
Joined: Mon Sep 19, 2011 1:48 am

Re: Stay with TSP or move out

Post by m.eddy »

One point of clarification, ARV (after repair value) and FMV (fair market value) normally are not the same. Invester ARV is what can I sell this property for in 30-90 days. Remember that hard money lenders and the private money lenders time limits 3 to 4 months. For an invester if you go past 90 days you are losing money in holding costs (interest on the money, insurance, taxs, utilities, etc). Real Agent FMV normally runs 6 months to 1 year because that is the length of time they have on the agreement to sell your house and you are still paying for everything.

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