401k Distribution & Job Change

[Eric Dietrich]

I am considering using my 401k available loan to purchase a smf that will be used as my family's primary residence.  As I am about to change employers, I am strongly thinking about taking out the loan and then not paying it back so it is treated as income as I have tax losses from the BRRRR of our current duplex. The other option I have is to use a bunch of the cash we have sitting in our bank account from the refinance. I'd prefer to stay as liquid as possible in today's market.

Thoughts?

[Basit Siddiqi]

I took out a 401K distribution to get started into real estate investment 5 years ago. Best decision that I ever made!

Some things to consider - 
The distribution may be subject to income tax and penalties.
Taking a distribution may be better to take in a year where you make less money(Potentially lower tax rate).

Are you getting a discount on the property?
If you are getting a $10,000 discount on the FMV of the property, and your taxes from the 401K distribution / penalty are $10,000.
It is almost a wash. Furthermore, you get experience from the property that would may not have had otherwise.

Talk to your CPA before doing the 401k distribution. Best of luck!