Borrow from your 401k?

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@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.

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I think it is fine, depending on what you are using it for. If you are using to buy a performing asset like real estate, great! If you are using to buy a liability like a car, not a good idea.

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Borrowed from my 401k for my first house hack and don't regret it. I have been lucky enough to experience significant appreciation on the property I bought so the the return on loan much greater than I would have received if invested in securities. I also continued to make my standard contribution in addition to the loan payback.

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I've done it and happy I did. If you figure in how the loan affects you cash flow and/or if you are going to BRRR the property then you can pay back the loan (typically) without penalty. With both of those being said the return I am getting on the RE is better than if it was left in the 401K

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I WILL be taking a loan out on my 401k here is my logic behind it... 1. its got no interest to anyone but you! you take it and say its a 5 year loan... you pay it back to yourself while you continue to put money into it. Where is the negative to that? lets say you take a HELOC your paying interest to a bank... lender same thing, every other way you will loose money to SOMEONE... so to me it only makes sense to borrow from yourself KNOWING you have to treat it like a loan so dont over extend yourself and not include it as a new monthly bill. HOWEVER "spoiler alert" you will have a major issue IF you do not finish paying yourself back e.g. transferring jobs or strike it rich in real estate and quit main job... so just be understanding forward thinking gl:)

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@Jared SkovI took a loan against my 401k to fund my first investment property.I am able to spread the loan over a 5 year period.I am paying interest on the 401k loan but it is to myselfMy employer did not charge me or my 401K plan a fee to set up the loanThe old rules was that you had to pay back the 401K within 60 days of leaving your employer(fired or quit).Now you have until the time that you file the following year's tax return to pay back the un-paid balance of the loan.

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@Jared SkovThis has been a long running debate on BP forums for a long time, and the consensus is split in half. Some people say yes, others say no. For me, I am on the side of the former. I borrowed from my 401K to put as a down payment on my current rental and I don't regret it. The naysayers will tell you that you are paying pre-tax money with after tax money and paying taxes on it again when you start to make withdrawals. You are taking away the wonders of compounding interest if you take out the loan, blah, blah, blah.For me, even though I took a loan from my 401K, I never stopped making contributions. So money is still being invested while I dabble in real estate. I feel as long as you are smart with your RE investment where your cash flow is double the amount you are paying back into the 401K loan, you are golden.

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Lots of people treat the 401K as some sort of holy grail of retirement investments that should never be touched until age 59.5 (or whatever the age is). I don’t agree with this, but i definitely think pulling equity out of an existing property (HELOC, home equity loan, OR cash out REFI) is a better option if you have it available.... I think the thing with a 401K is that if you leave your job you have to pay the whole loan back within a short amount of time.

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Basit Siddiqi Thank you for following up and advising of the new changes. Am I correct in reading that it only applies to loans taken out after 01/01/2018 ??

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@Robert SchumacherAs I mentioned in my original post the requirement to payback within 60 days is an old rule.