401k loan for property purchase then refi?

Question

I am looking to purchase a property cash by using my 401k loan to finance the purchase.  i also have 50k in savings from my last house flip to fund the renovations.  I am looking into using my 401k to buy the house outright as the owner has gutted the property and i cannot get a conventional loan.  the bank has stated i could do a commecial loan for a short period but there would be closing cost.  Then i could refi once i get the house in a livable condition.  However since i have the 401k loan option should i just purchase the house cash and wait 6 months to refi?  Its seems silly to me to process 2 loans in a short period. I generally would never touch my 401k but if i can pay it back in 3-6 months would this be a viable option?  I would love to hear any opinions on this subject as i keep going back and forth with this and need to make a decision this week.  Thank you all!

George Blower · Answer

@Kyle Allen

The good thing is that the 401k loan can also be paid back early without prepayment penalties.

Kyle Allen · Answer

@John Warren will I need additional funds to secure the refi at the end of the period? As in will the bank require 20% down or will they cash out refi up to 80% or the ARV? Just what to Ben prepared when the time comes to refi. Thank you!

John Warren · Answer

@Kyle Allen this is a great strategy. It makes a lot more sense to avoid closing costs, appraisals and fees if possible on the 1st purchase. You can pay those once and get all/most of your capital back out at the 6 month mark like you mentioned.