Cashing out 401k for start-up capital

[Jarred Cline]

Currently we have 28k in savings and we are looking into getting into multi-family investing. This is something that we do not want to touch if we can avoid it. With needing a 20% down payment I have kicked around the idea of cashing out my 401k (my work plan does not allow for a loan). My 401k is only 4 years old and is sitting around the 40k mark in value right now. I am aware the penalty will drop me down to $28k after penalties and taxes. The way I look at it there is more potential gains in the real estate side of investing rather than my 401k. I am 35 and I could start my 401k over with and use the cash flow from properties and savings going forward to re-invest in more properties. The other option is a HELOC, but then this would be two payments 1 to cover the mortgage and 2 to pay on the HELOC. Has anyone been in this situation. Open to any information that I may have missed here as this would be my first property. Thank you!

[Caleb Brown]

I would not touch your 401K, I would keep that and continue to put money into it. Can you move out of your current home and house hack another? Owner occupant loans can be 3-5% down, you can target a 2-4 unit. Sell or rent out your current home. If you did a HELOC it would be ideal to target a BRRR or a flip. I would not use a HELOC as a DP for a long term loan. You can use a HELOC to fund a hard money loan. This is riskier and has more moving parts. Outside of that I would continue to save and look into hard money/private money loans.