If you have been in the business for a while, you know Real Estate goes through cycles that you have no control over just like Hurricane Season. But, there are choices you can make to give you a better chance to endure those inevitable cycles.
When the economy is good, and sales are closing regularly, rents are rising, and occupancy is high there is excess cash. And the bankers are willing to lend helping you replace a roof or unexpected damage, or get you through a delayed big closing. It's during slow times, bankers become a little more stingy with loans, and cash may have dwindled
Just like nailing down wood over windows, bringing in deck furniture so it doesn't go flying off into other structures doesn't guarantee that you go unscathed, it gives you a much better chance. The winners in Real Estate are the pros that can stay in the game during the slow season, and the down cycle that takes too long.
How To Protect Your Cash
Cash is King during those times. So, where do you park that cash so that it is available, but not too available that it gets spent?
- For short term needs we recommend a combination of money market funds, ultra short term bond funds, and some other short duration income funds like bank loans that pay much better income than parking at your neighborhood bank, and still, have quick access.
- For longer staying power during those protracted down cycles, and eventual exit from the business, consider the Solo 401(k). During the good times, you can lower your income tax by deducting $19,000 per year (or more if you or over 50) and you possibly can include your spouse for the same amount.
Consider if you will, the possibility of deducting from your taxable income over 2-6 years $100,000 and the tax savings that provides. Now think about the time you needed up to $50,000 in cash for an investment property whether it was down payment or repair and the bank was unwilling. You know, those down cycles.
Develop A Plan Today!
Your Solo 401(k) can lend you, tax-free, that kind of money. No credit check, just fill out the form. And the loan interest goes back to your retirement account- not the neighborhood bank. Most of the loan is taxes you didn't pay because you made this choice! Cash is King!
Think about how this can help Storm Proof Your Real Estate Practice by keeping you in the game while others are dropping out. Just give us a call at (770) 800-2851 or email me at firstname.lastname@example.org and we can review the best strategy for your specific portfolio.
If we haven’t worked together before, I’d love to get to know you first and give you a chance to get to know me. You can click here to book Your Complimentary Consultation.