Updated over 7 years ago on . Most recent reply
Using 401k to buy multi portfolio.
BP members,
Looking for some advice. Have one rental that has been successful in the DMV area. Currently live in the midwest (2 1/2 years now), prices for houses are so much different than the east coast. To make a long story short, my wife and I are evaluating a portfolio with 40 plus doors and looking to make an offer. If looking at this correctly, it will place us essentially into the "financial freedom" area we've been striving for (but we will still keep our day jobs). My question to you experienced investors out there, should we use our 401k to make the down payment to get the best interest rate? If so, how can we do this without paying crazy penalties? Thanks in advance for your advice!
Most Popular Reply
#1 New Member Introductions Contributor
- Solo 401k Expert
- Anaheim Hills, CA
- 6,295
- Votes |
- 17,888
- Posts
#1 New Member Introductions Contributor
- Solo 401k Expert
- Anaheim Hills, CA
If you personally want to buy this property - you can't use your 401k for a down-payment (unless of course you take the distribution and pay taxes and penalties, not a good idea!). If your 401k allows for personal loan (check with your plan administrator) - you may be able to borrow up to $50,000 but no more than 50% of your 401k balance. Personal loan can be used for any reason, including as down-payment for investment property. If you decide to go this route keep in mind that this would be 5-year loan so the payments would be pretty high.
If your 401k is with the past employer - you might be able to roll it over into self-directed IRA. Then the IRA can buy the property. But you can only use non-recourse financing, which typically requires larger down-payment, depending on the balance of your 401k and the purchase price, this may or may not work for you.