401K

How to Get a Real Estate Loan with You 401k

Is your 401k under-performing? Need money for real estate investment or a house purchase but banks aren’t lending? Why not borrow against your 401k?

Why not get a real estate loan with your 401?

Most employers offer you the option of borrowing against your 401k. Many people advise against this, especially if your job is at risk. I don’t think that borrowing against your 401k is a good idea for buying a new car or taking a vacation.
But I think that getting a real estate loan with your 401k funds is a good idea. Why is that?

• your 401k account will earn a steady interest income that is better than you can get with a bond fund or even a stable value fund
• you don’t have to “pre-qualify” for the loan
• if you are using the loan to buy your personal residence you can get a 10 year term
• no closing costs

you can get your hands on the money very quickly

There are some naysayers that will try to persuade you that this is not a good idea. The claim that you will be taxed twice does not hold much water since the interest rate your 401k account earns off-sets additional tax benefits.

Now, of course, if you can get 12% on the money in your 401k this may not be a good bet. But over the past decade, my 401k account has not had that kind of return.

Typically, you can borrow as much as $50,000 against your 401k balance. If you can find a good rental property investment that will provide a positive cash flow, you can use your 401k funds like cash to get a better discount on the property you are buying.

Today’s real estate market is providing lots of opportunities for great buys. If you have retirement funds you can use your 401k to get a real estate loan. But there is even a better way to get real estate loans. That is by using a self-directed IRA. Look here to understand how this is the best real estate loan you can get:

Self-Directed IRA
Use a self-directed IRA to create real estate loans

By Paul Beauchemin Published: 4/14/2009

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