My Cash Isn’t Liquid

[Jessica Fish]

I have about $60K in 401(K) accounts and approximately $100K in equity in my home. I want to invest but I don’t have any liquid cash besides what is in these accounts. I am not against taking money from 401K for real estate as long as my rate of return in real estate is higher. I’m concerned that $60K ($50K after penalties) won’t get me far in starting a short term rental though… I’m also hesitant to do a cash out refinance on my home loan because we have a great interest rate at 2.625%. Does anyone have any tips or advice for getting started in my current circumstances?

[Deb S.]

Quote from @Jessica Fish:

I have about $60K in 401(K) accounts and approximately $100K in equity in my home. I want to invest but I don’t have any liquid cash besides what is in these accounts. I am not against taking money from 401K for real estate as long as my rate of return in real estate is higher. I’m concerned that $60K ($50K after penalties) won’t get me far in starting a short term rental though… I’m also hesitant to do a cash out refinance on my home loan because we have a great interest rate at 2.625%. Does anyone have any tips or advice for getting started in my current circumstances?

Hi @Jessica Fish are these 401k accounts with your current employer? If they are not, you can roll over your 401k into a Self Directed IRA (SD IRA) and invest in real estate that way.

You could also apply for a HELOC on your home to use the equity for whatever but obviously you have to make monthly payments so ideally you'd want to make sure the cash flow from a RE investment is higher than your loan payment.

Another piece of unsolicited advice.... If you don't have any liquid reserves, you should build up 6 months of expenses as an emergency fund (in case you get laid off, disabled etc). So lower your 401k contribution so you can build up some liquid cash you can use without penalties.