Thoughts on borrowing from 401k to purchase a second rental property? I'd need to borrow about 40k.

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I'm betting against my 401k. I dont contribute anything. Instead I use savings to purchase 2-3 br homes/condos near college campuses of major schools in Georgia & Texas & rent by the room to graduate students.

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For rentals you need to do the 20%

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Saving 18k tax free for 30 years of work? I’m sure they have 😉 relatively speaking most of America would love a fully maxed 401kb

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Thanks, EY1.

I also max out my 401k. I like the idea of having 5k a month in cash flow (2018 dollars) when the investment property's mortgages are paid off to support me after I retire. Hopefully, before 65.

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I’ve been having a new perspective about 401k lately and made my decision not even to do it. It doesn’t cash flow and why do I have to wait until in my late 60s to tap in that fund. Oh and I look at my <4% ROI lately, compared with at least 10% on a rent house and cash flow!! That’s no brainer!!

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Look into solo 401k

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Why not save cash for a year ?

The unit I want to buy is going to be listed in 2 weeks. It's across the hall from the other unit I own.

To me it is risky. You are killing your investment diversity (moving from the stock market to heavy in real estate). Also you are literally in the same building in the same city. What if the area prices go down ? What kind of cash on cash return are you predicting ?

Thanks, M1. I would be paying back the 40k, so I would be less diversified for a couple years while I was repaying the loan.

I am mostly trying to create cash flow that will partially pay for my retirement.

Totally get that. I have two and looking st another now. But I have the cash ;). Other concern I didn’t note is how much stocks have gone down last month. What kind of hot are you taking by moving ? Just a thought

If I put 10% down, I would have the cash too. No idea if I could get a mortgage for a rental property with only 10% down.

Looks like stocks are not at their high, but they're still historically high and have rebounded a bit since the small correction.

That's what I figured.

20%for investment property as stated above. It's definitely a risk but sometimes that's what it's about. If it's a calculated risk, go for it. No one ever got rich off of 401ks. -)

Are you all contributing max to 401k? I currently do but I’ve been considering adjusting to just meet the minimum company match and use the add’l $$ to save for down payments on cash flowing rental props

I have been contributing the max.

A1 interesting. What kind of annual returns are you getting after maintenance, repairs, etc.?

Ignore property appreciation, which could be pretty substantial.

Why ignore appreciation?

If you put 50k down on a place that is worth 250k then let’s assume 2% modest growth per year. That’s 5k out of 200. But due to leverage you out down only 50k. So 10% return- just for holding it and making cash!

Wouldn’t do it

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