Using Roth 401K to finance 1st property

[Jay Elvin]

Hi everyone,

I'm a new investor looking to purchase my first multi-family home.  I plan to finance the down payment with a loan from my Roth 401K.  I will pay this loan back to myself over 5 years at a 5% interest rate using the cash flow from the property.  After expenses and loan repayment, I plan to have $200-300 leftover.

Does anyone have experience using this type of financing or can offer any advice?  I have always heard its risky to touch your retirement account but I don't see any downside if I am able to make the loan payments with the cash flow. 

Thank you!

Jason

[Joe Ellis]

I say write all expenses out and write out what the average rents are in the area and figure out what your numbers will be (which, it looks like you've already done this) and then go take them to someone else who owns multifamily in the same neighborhood as you. Ask them what they think, what they'd change, what they'd keep the same. Then go ask a Realtor and your tax professional and see what they have to say. If you get thumbs up all around, run the numbers again and make sure that everything works, (measure twice cut once), then I say go for it! Good luck and keep us posted!