Need some advice and answers - Posted by CJinPA

import · June 19, 2000, 9:02am

Posted by Nate on June 19, 2000 at 14:21:14:

Another option would be to put money in a money-market or bond mutual fund, which you could then borrow against. Pretty much any brokerage could do this - I use waterhouse, www.waterhouse.com - low fees, low minimums, and pretty reasonable margin loan rates.

import · June 19, 2000, 9:02am

Posted by CJinPA on June 19, 2000 at 09:02:33:

Here is my situation and I need to ask you fine folks to help me out a bit.

I am relocating from the Philadelphia, PA area to Central NJ where the cost of living is quite higher. My wife and I are moving from a $180,000 single family home w/ $100,000 equity to a $160,000 Victorian duplex where we are putting only $60,000 down. After taxes and paying the PITI, our home expenses will come to be ~$250/month (top floor pays $950/month).

This will allow us to put $40,000 in 6 month CD’s as we roll them over for 3 years. By buying the duplex this allows us to save $2,000/month towards building a home 3-5 years down the road.

My question is, can I borrow from the bank against the money that I have tied up with them in CD’s? There are properties that become available (multi’s) in this area and I’d like to purchase 1-2 of them when they become available but want to also have the money(cash) to build a few years from now.

What would be the best avenue to take in my situation?

any thoughts are greatly appreciated.

CJ

import · June 19, 2000, 8:43pm

Another suggestion…long range…and long - Posted by soapymac

Posted by soapymac on June 19, 2000 at 20:43:29:

CJ,

Given your goal is to have ten multis in 11 years, here is an idea for you. Whether or not you can use it depends on whether your income is the only one in the house, or whether you have both yours and your wife’s income. This would DEFINITELY REQUIRE that you check with your financial planner. If you have a 401(k), or your income is beyond the limits of what I’m suggesting, then never mind. Here is the idea:

Check with one of the advertisers at the top of the page to see if you can place money into a self-directed IRA (regular or Roth, depending on the advice you get.) Then use THAT MONEY to invest in one of your multi’s in 8 - 10 years. Look at these numbers for the potential, and you’ll see why it bears checking out.

An example: use a regular IRA and put $2,000 in it for 9 years at 8%, compounded monthly. If I did this right, that is a total of $26,238.00 available to you after nine years (double this if your wife is working and she puts in the same amount, too.)

Rounding everything off, you have $52,500 in your two IRA’s available for one of your last multi purchases. Keep that multi rented for 25 years…then sell this multi, put the monies back into your IRA, and retire.

All of your growth is TAX DEFERRED and NOT subject to capital gains rules as we know them. The taxes WOULD have to be paid when you withdraw the money…the same way a “standard” IRA would be taxed.

How much would you have. I don’t know…but here is an instance where you can grow your capital.

Worth a check out, anyway.

Cordially,

Roy MacLean
“soapymac”

import · June 19, 2000, 10:33am

Re: Need some advice and answers - Posted by JPiper

Posted by JPiper on June 19, 2000 at 10:33:05:

You might want to investigate the purchase of T-Bills, a short-term federal government obligation. The rates may be competitive, and are exempt from state taxes. Further, these may be held in a brokerage account and borrowed against easily and quickly. You may also be able to hold these at a bank…check them out. Your best deal is to buy these at an auction, which are held weekly I believe.

Just another option.

JPiper

import · June 19, 2000, 9:37am

Re: Need some advice and answers - Posted by Mark in OKC

Posted by Mark in OKC on June 19, 2000 at 09:37:31:

I agree with Phil, but to answer your question, yes you can borrow against your CDs. I’ve done it many times to do rehabs. Where I bank they call it a stock loan.

Good Luck
Mark in OKC

import · June 19, 2000, 9:21am

Re: Need some advice and answers - Posted by phil fernandez

Posted by phil fernandez on June 19, 2000 at 09:21:07:

Sure you can borrow against the CD’s by pledging them as collateral for the loan.

I would not put $60,000 of my own money as a downpayment towards your new place nor would I put the rest of my money in 4% interest CD’s which after factoring in taxes on the CD interest and inflation, you would be losing money each year. Your money’s buying power will shrink.

Instead I would get into a mortgage with as little down as possible. With good credit there are programs where you will need between 0 - 3% down. Higher monthly payments, but also larger interest deductions on your income taxes.

Then read everything you can on this website and start to invest your $100,000 in creative real estate deals such as lease/options, flips, subject to deals and others that you will learn about here.

You have two things going for you here. You have $100,000 liquid cash and you have just accessed the best real estate investing site on the web.

import · June 20, 2000, 7:26am

SOAPYMAC, thanks for the suggestion, I LIKE IT! - Posted by CJinPA

Posted by CJinPA on June 20, 2000 at 07:26:49:

I’ve thought of this too. I think it’s time for me to sit down with a financial planner, honestly.

I’d like to forgo the taxes at the end so a Roth may work for my wife and I (we’re DINKs). If it is allowed with a self directed Roth.

Thanks for the suggestion, I really like it.

CJ

import · June 19, 2000, 1:35pm

Thanks JPiper, I’ve thought of T-Bills too - Posted by CJinPA

Posted by CJinPA on June 19, 2000 at 13:35:05:

but didn’t realize that I could borrow against them. I’ll look into this avenue. Thank you

CJ

import · June 19, 2000, 1:44pm

Re: Need some advice and answers - Posted by CJinPA

Posted by CJinPA on June 19, 2000 at 13:44:23:

Phil-

Thanks for the tips, I appreciate them. I think you are right about not putting $60,000 down on the house.

I will indeed read everything I can on this site.

We plan on keeping the Duplex after we move from it in a few years. My goal was to start slow w/ 1-3 multi’s before we move and like you said ,I may be better served with using the equity I have in leveraging that cash to do some other deals.

My end goal is to own these properties and have a property management company manage them as I purchase more dwellings. I’m 29 now and would like to have ~10 multi’s by the time I’m 40. I’ll have my first by November.

thanks for the suggestions

CJ