Investing advice Houston TX Area

5 Replies

Hello Fellow Investors,

I'm still a newb and have not found my first deal yet. Recently I was having a chat with some patrons at a coffee house. They told me that they recently purchased a house using 401K funds as a first time home buyer. They were waiting for some renovations to be complete and now they do not want to move in, but instead want to rent the house and move into a house left to them by a departed family member.

They asked me if there would be reprecussions from the 401K loan because they are not actually going to live there. I couldn't answer their question because of my inexpierence. Can someone chime in with what could possibly happen?

Actually you might have it backwards -- if they invested their OWN 401K funds into a property, then they cannot live there themselves. Nor can their kids, parents, etc. They can own it and use it to generate investment return, but the proceeds must go back into the 401K. Hopefully some self-directed IRA professionals here will elaborate.

Maybe I am not understanding the situation correctly?

@Wally Martinez They are actually just fine. Depending on your plan, you can borrow up to two loans from your 401k without stipulations on how the funds are used/invested. All loans have a payment plan for paying those funds back that starts when the money is lended.

Originally posted by @Wally Martinez :

Hello Fellow Investors,

I'm still a newb and have not found my first deal yet. Recently I was having a chat with some patrons at a coffee house. They told me that they recently purchased a house using 401K funds as a first time home buyer. They were waiting for some renovations to be complete and now they do not want to move in, but instead want to rent the house and move into a house left to them by a departed family member.

They asked me if there would be reprecussions from the 401K loan because they are not actually going to live there. I couldn't answer their question because of my inexpierence. Can someone chime in with what could possibly happen?

If they took a 401k loan with a term longer than the standard 5 years based on the premise that the funds would be used to purchase their primary residence (and ultimately they were not used to do so), it would be prudent to investigate accelerating the re-payment schedule to a 5-year term.

 

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