Lending Options for Purchase of Multiple Properties

[Ryan Peach]

I currently own 3 rentals (4 doors). All have mortgages, but all properties cash flow. The last property I purchased was a duplex and the gentleman I purchased it from has 5 additional duplexes that he is willing to sell as one deal. The numbers look good (Purchase and Reno cost of $300,000 and $4500+ monthly rental income). My concern is getting the funding for this deal. My previous deals were all done through construction loans so no money down, but I had to drop nearly $10,000 of my own money into the duplex because of unseen issues. That was all of my cash!!!! I do have over $30,000 in a 401k, but I would like to keep that money there if possible. I have heard of converting a 401k into a self-directed 401k which would give me access to those funds without penalty. That would still only be 10% down I would need $80k-$90k for improvements. My questions is....

What are my lending options?

What have you done that has worked in similar situations?

[Dmitriy Fomichenko]

Ryan,

If your 401k is with your current employer - they most likely will not allow you to move it out. If the 401k is with the past employer - you are free to move it to another retirement account. 

Truly self-directed Solo 401k plan is not for everyone, to qualify you must be self-employed or own a business with earned income. If you are eligible - this is a great option, otherwise you can go with self-directed IRA, anyone can set that up.

If you go the self-directed route - you can buy investment property in your IRA or 401k and use leverage. The loan however must be non-recourse. You are not allowed to use conventional financing because it would require personal guarantee - which is prohibited by the IRS rules. Non-recourse lenders typically will require 30-40% down, however you may approach the seller to see if he would agree to seller-finance.