Should I use a 401K loan as a down payment for a rental property?

[Monica Young]

My husband and I are thinking of using a 401K loan as a down payment on our first multi-family rental property. We may or may not live in it as well. We both work full time and we'd like to use all of the cashflow to pay back the loan & then after that, save for another property. If we live in the property and the other unit covers most or all of the mortgage we can pay down the loan faster. Does that sound like a good strategy? 

[Nathan Waters]

@Monica Young

@Michael Seeker

I think that depends on the lender and the employer. I used a 401k loan to kick start my investing and bought 2 houses at the same time (Cash deals). I used a non secured loan to fund the rehabs and did a cash out refinance to pay back the unsecured loan. I kept the rest of the cash from the refinances as a down payment and renovation fund for the next house and got a mortgage for 75% of that purchase price. The lender never took into consideration my 401k loan and I am still paying it back now. I could have used the money from the cash out refinance to pay it back but its a 4% loan and I wanted to keep the ball rolling. 

I would definitely recommend using this strategy to get started as long as you are smart about the property you purchase. Make sure that it makes sense and cashflows. Good Luck