Borrow from your 401k?

[Jared Skov]

Quick poll - How many people have borrowed against their 401k for Real Estate Investing and do you think it's a good idea or no? Personally, I act like I can't touch my 401k to stay diversified, but I have friends who have borrowed against it to join the REI crowd and I would love to take a chunk out to house hack a Multi Family. Would love to hear some dream scenarios vs. horror stories!

[Ray Johnson]

@Jared Skov I don't borrow against my 401K, instead I use my 401K for what it is, a strategic investment instrument. If you're going to scale up in your portfolio the bigger you get the more reserves you'll be required to have, Everytime I identify an asset and need to act quickly it's always a simple process, cash on hand for the down payment and a 401K statement to satisfy the reserves requirement. Once the deal is done I can use the same 401K account for the next deal, and the next, never decreasing my 401K balance yet using the account to secure Real Estate Investments........... If you borrow from the 401K account as a loan, I'd be limited to the one deal until the loan is paid back then use it again while also decreasing your 401K growth potential. While there is no right or wrong answer to this common question, one strategy provides far more access and leverage than the other strategy.