Becoming Self Employed, Cash Out 401k?
We've read many hours on BP throughout the last couple of years! SO much knowledge & great advise!
I'm hoping someone can make sure we're on the right track...My hubs & I have been part time flipping for a few years while he held down a full time other job. We've done around 10 flips. He's finally decided to pursue our flipping business full time :) I will continue with my 24 hr per week other job for now. We've got a couple rental properties & are looking to acquire a few more once everything settles down (moving, buying land & building a smaller home). We don't want to be rich, just live comfortably :) Our question is what to do with the approx $100k in his 401k? We're going to need at least half for our next flip since we're using our acquired cash to build our next home. Should we do a loan on the 401k? We were told today that we could roll the $ into an IRA & could take a loan up to 90% to acquire our flips with NO tax penalties if we paid it back within 6 months. It sounded to good to be true & everything we've read says that info is incorrect. Does anyone know? Of course everyone is not in the RE business says it's a terrible idea to use ANY of the 401k for RE investing. But you're going to get taxed on it eventually. The $ will be used to MAKE $. We realize it will put us in a higher tax bracket & essentially be taxed twice but it seems worth it to us (we're 38 & 40 yrs old). We'd love to go from 80+ working hours per week to around 30 within the next 10 years. We're currently living in a flip (for 2 years) to avoid capital gains tax but this is a one time deal since we're building. Also, we've currently got an LLC for our flips & rentals. We're looking into an S or C Corp to allow hubs pays himself to help with taxes? Any advise for anyone tackling RE full time? He's been at his "regular" job for 17 years so we're just trying to get a feel of self employment. I know the Obama BS insurance is crazy, so we're going to try & keep income under $74k per year to avoid the extra $1k per month on that along with the higher tax bracket. Ughhh! We're heading to our CPA next week. He's a good CPA with a good reputation but doesn't "specialize" in RE (we're in a small town & he's the best we have :) Any advise from the professionals would be GREATLY appreciated! *I forgot to mention I've looked into the self directed IRA but it doesn't seem like something that would be beneficial to us since hubs does 90% of the work on the flips himself. IRA? 401K? Loan? Cash out? Thanks, Nicole