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Read Transcript for “How Do I Get My Money Out Of My Rentals So I Can Reinvest?”
“I’ve got 15 single family home rentals in one LLC with no debt and want to take cash out to do more deals but it’ll be pretty expensive to pull the money out. Do you have any ideas?” – Chris Marino
Joe: Well first of all, what you have to ask is this – I don’t have all of the information here – is this LLC an IRA or a Roth IRA or is it just a regular LLC? Is that LLC held by a corporation (or however you’ve got it set up) so that’s one question that I would ask.
Joe: But let’s assume this is just a standard LLC. You’ve got these properties in them and you have them all free and clear. Let’s say there’s 15 of them, so let’s say you’ve got close to a million dollars in property in here. Now, if you went out and went to bank, most banks will not give you an umbrella loan even on 50% of these mortgages. If you don’t have any mortgages in your name, you might be able to go out and get them financed to some degree, but it probably doesn’t make sense.
Joe: My suggestion is don’t use the money in your equity in order to go out and buy more properties and leverage against that. Use that as your retirement. You’ve got 15 properties that are bringing in money every month – if all of them are bringing in $500 a month, that means $7500 – you’ve got almost $100,000 of income on these properties coming in, and that’s a great retirement – you can live pretty well on that.
Joe: And if you take the money right now that’s coming in on these properties, you can go out and buy more of them. I don’t know what price range you’re looking at, but if you’re in the 30, 40 or $50,000 price range, it doesn’t take but a few months before you have enough cash to buy another property, and then you can take that cash and just sink them back into more properties.
Joe: And hopefully you’ll buy them under market value, even 20 or 30% under market value. You do a little fix up, you put another tenant in there and then you start collecting income on that. And then you move onto the next one and then the next one and then the next one. That’s the way that I would and the way I do deal with my rental properties.
Joe: I’ve got properties inside a Roth. I’ve got properties in just LLC’s that I own. And I use them for different purposes. Most of the properties that I have free and clear are inside my Roth because it’s after tax money. So when I retire (which is getting closer than i like to admit – at least the age, not the actual retirement – I have no intention of retiring) – but when I get to the age, I think its 59 and a half where I can pull this money out. I don’t have to pay any taxes on this money when I pull it out. It’s not like a regular IRA – a Roth IRA is after tax money, and I bought those properties inside the IRA. So it makes a lot of sense for you to do, too. You can set them up as Pensco (the company that I use) – if you type in Pensco.com you can find how to set up a Roth IRA.