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Updated almost 4 years ago, 02/16/2021

User Stats

6
Posts
1
Votes
Danielle Mulvena
  • Philadelphia, PA
1
Votes |
6
Posts

401K loan or savings?

Danielle Mulvena
  • Philadelphia, PA
Posted

I am purchasing my very first deal and trying to decide if I should use a 401K loan or my savings to fund the down payment and closing costs. With 10% down, the property has a 12% CoC ROI and a 21.5% annualized return. My 401K has an 18% ROI over the last year, but we all know 2020 has been a boom year for the stock market (3 yr return is 13%). Based on historical cycles, I anticipate the market is going to dip over the next 10 years, which means having my money in a real estate investment would most likely make more that the stock market fund. So I face the decision, take the 401K loan with a bet that my property will do better than the 401K fund over the next few years and invest my savings in another property in about a year, or just use my savings now and consider a 401K loan later. Thoughts?

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