Wednesday, April 5, 2006

Gearing Up For The Next Big Investment

After seeing Steve's presentation about multi-unit properties at the Rich Dad Forum Members Get Together (how's that for an awkward title?), my wife and I have become convinced that apartments are the way to go. The good news is that loans for these properties are commercial loans and so the bank doesn't really care about your financial statement - just the property's. The bad news is that they require a higher down payment. So to get ready for moving into this investment area, I've initiated some changes to my financial picture.

First, I am rolling the assets from my 401(k) with my former company to my new company's 401(k) plan. This is actually relatively painless, since both plans are with Fidelity. However, since I no longer work for my old company, I cannot take a loan against that plan. By moving the assets to my new 401(k), I am able to get a loan against these funds, should I need one.

Second, I am closing an old HELOC on my personal residence and opening a new one with a much greater credit limit. My original HELOC was for a maximum of $26,000 and I had opened this when I purchased the house over 2 years ago. Since that time, the value of my house has more than doubled, so I'm going to tap into that equity. The new HELOC will have a limit of $165,000. As an added bonus, the interest rate on the new line is 2 percentage points lower than my old one. Considering interest rates have risen since I opened the first line, this is a nice surprise. (It may be partially due to the fact that the new line is with a credit union, rather than a bank.)

Even with that much buying power, I'm still looking to partner with someone or someones for our first apartment purchase. Apartments have a whole different set of considerations than single family homes and I'd like to team with someone with experience in this area.

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