Liquidating and Mortgaging to Purchase/Buying Cash or Financing??

[Jenna Cawlfield]

Hi All…

So I have been working with my husband working on a way to get started with PI and we keep finding properties and then my Husband finds some reason to back off “for now.” I am much more the get started and figure it out at you go type person and he is the plan until it dies type.

Anyway, I have found a great property. Good price point, well kept neighborhood, excellent rent return. (We are planning to buy and hold) 

Anyway… as we are just starting out we don’t really have any liquid funds right now. So we will have to pull from 401K or from the equity on our primary residence. So we have 2 options with this property that I see. Mind you, we have about $110K equity in our home.

#1. We pull the down payment from our home as a HELOC and finance the rental and deal with the BS interest rates.

#2. We liquidate my smaller 401K and take the remainder out as a second mortgage and buy the rental outright as a cash deal.

Does anyone have any thoughts or opinions? Ideas? 

[Erik Estrada]

Can you get a loan from your 401k? This might be better than pulling from it. The HELOC will come in handy if you need to finance any rehab. You don't need to pull from the HELOC to open one, and if you do decide to pull from it, you only pay interest on the amount drawn.

I would look into doing both to have that extra cushion. There are many variables when it comes to buying a rental property. Having that extra cushion will come a long way.