1st Property Problems

[Collin Ricter]

Good Afternoon,

I would love to get some input on my situation. We bought our first unit ( 3 BR x 2.5 BA) in February 2022 its currently rented out through March but is not cash flowing due to a few incorrect estimates on my part.

Some of these items are minor and will work out with time but the biggest blow to profitability is the HELOC we took against our primary residence to come up with the payment for the rental. I imagine everyone is dealing with rising rates so this is probably white noise but the rate on the HELOC went from 4.25% to 8.00% in approximately 6 months. I never intended to take the HELOC to term so the increase just adds a little more urgency to what I was already planning to do. I currently owe ~$72k so my thought now is to borrow from my 401K, max allowed is ~$50k pay myself back at ~5% or so, and come up with the remainder through aggressive saving and tax returns. Am I overlooking anything in this scenario or are there other viable options I should consider? Thanks

[Mohammed Rahman]

Hey @Collin Ricter - instead of pulling the money out and possibly taking a tax hit, and a valuation hit, have you considered working with a bank to consolidate your debt with your 401k as collateral?

You might want to first start by reaching out to your 401k provider to see what type of programs they might offer to borrow against your own assets. You can write off the interest on borrowed money FYI.