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Updated about 8 years ago on . Most recent reply

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Jeff Martin
  • Investor
  • Springtown, TX
5
Votes |
8
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401K or HELOC for ~$50 to invest in rental purchase?

Jeff Martin
  • Investor
  • Springtown, TX
Posted

At the risk of it being a rookie question - I didn't find anything in search that directly scratch the itch so I figured I would throw it out there for opinions here. 

Background: New to investing - this will be the first buy-and-hold rental property with the intent to repeat after I have my feet wet. 

I can pull $50K at a 5.25% from 401K or pursue a HELOC from my primary for around the same amount. The intent is to buy the property and then shop for a loan on the rental to repay the cash to either the 401K or HELOC.

Are they both viable options or do most pursue one more than the other (or another path when starting out)? 

I GREATLY appreciate the feedback and patience with the questions.

Most Popular Reply

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398
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1,006
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Collin Schwartz
  • Rental Property Investor
  • Papillion, NE
1,006
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398
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Collin Schwartz
  • Rental Property Investor
  • Papillion, NE
Replied

@Jeff Martin I use a HELOC for all my down payments and then finance the rest through commercial lending. My HELOC is 4.75% fixed for 5 years. In essence I am 100% leveraged on all my properties. I have considered using my IRA but there is one stipulation that has deterred me. If you use IRA funds the investment can not be managed by you without receiving/paying for the right to do so (I am not sure this is true in every State or if I am phrasing it correctly). Best of luck and please research the IRA route before basing your decision solely on my statement. Thanks!

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