Rental Property Investor · San Francisco · Member since 2020 · 4 posts · 0 votes
Hi all,
Wondering if anyone has any advice for the best way of paying for a down payment for an out of state investment (not owner occupied).
I'm in contingency for a $200k property that I'll be putting 25% down on so I estimate close to $60k in upfront costs.
I have the following pools to choose from:
$20k in savings
$28k in a self-directed Roth IRA (18k of which is principal)
and almost $100k in a company sponsored 401k
I've heard various things this year with regard to opportunities to pull from 401k without penalties, but I'm still unclear on all the ramifications. Similarly I've heard about advantages of funding investments through self-directed IRAs.
Does anyone have any up to date advice on what would be most beneficial with the fewest penalties/issues involved?
Rental Property Investor · Member since 2021 · 58 posts · 17 votes
5y
I did a loan on my TSP account (military retirement account) to pay for a down payment on an investment property, but I'm not sure if that's the best way to do it. Just the way I did it. I am paying it back monthly, but with a low interest rate, and paying it all back to myself.
In your situation, I'm not sure of your question. To get $60k to close, you have to pull either entirely or somewhat from your 401k, assuming you can. So, you are asking how much and which of your other two pools of funds to pull from?
Rental Property Investor · San Francisco · Member since 2020 · 4 posts · 0 votes
5y
@David M. Correct. I'm wondering if there's any benefit of pulling a majority from 1 (namely 401k) for tax and fee purposes vs the others or if I should minimize the loan from my 401k at all costs.
Another option I'm considering is pulling the max amount from every source aside from 401k and seeing if I can get a family/friend loan of roughly ~$12k.
Not an expert in this topic as I was taught not to pull from "formal savings" to invest. The strategy is counterintuitive.
But, I think its a matter of how fast do you expect to pay it back and where do you lose the least opportunity. The markets have been going crazy --- at least for now. If anything, take the funds that are performing, or expected to perform, the worst.