A question that I usually get from new investors is how much cash is needed to invest. When investing passively with active syndicators, each will have their own minimums. Usually, the typical minimum is around $50,000. This article is written on the assumption that, as a working professional, liquid cash is not the option.
Below are 3 creative ideas for funding sources for working professionals or investors in other assets such as stocks who seek investing in multifamily assets.
Sell home or Rental
If one currently has a rental property or second home with equity and decided to make a focus to apartment investing, perhaps it is in interest to sell the home and use the proceeds to prepare for multifamily investing. After all, the goal of multifamily investing is to achieve the benefits of scale, receiving a portion of cash distributions from many units versus only one or two. Why hold onto one property when one can use it to get started in investing in larger real estate with others? Of course, to sell a home may have capital gains tax implications.
Refinance Home or Rental
Rather than sell the house, is there sufficient equity and the potential to continue to positively cash flow even after the cash out, this option could be great for some. For example, if one has a rental that is outright owned and chooses to refinance, he or she would pull out funds that can be used for investing while still being able to achieve cash flow on that home with the mortgage (rent exceeds mortgage and operating expenses). This could be a good balance for someone who wants to hold his or her rental but tap into cash for other opportunities.
Self-Directed IRA or QRP
In a previous article, we discussed the benefits of a self-directed IRA for those who seek to invest in real estate. Whereas the standard 401k does not allow for investing in certain assets such as real estate, the self-directed IRA allows working professionals more investment options. Many choose to roll an old 401k plan from a prior company into an IRA affording them this option to use the funds for real estate investing, including passively investing in apartment syndications. Find out how I rolled my retirement into an EQRP to invest in my first multifamily opportunity. Seek professional advice and understand whether this option is right for you.
For many, the most liquid option, cash, is not the ideal funding source. Many passive investors have gotten started on their real estate wealth-building portfolio through any of the above options and more.
If you have not read our Passive Investor Startup Guide, download it here for free!
💡Invest Your Retirement w/ eQRP
– How To Use Your 401k To Invest In Real Estate
