Strategy for using retirement funds

[Cory Adams]

Not sure if this the right forum but here goes. I have funds in an SD401K vehicle. The challenge is using those funds strategically. For example of somebody had 150K they might use financing to buy a 10 unit apartment but that will not get you very far if you are trying to use non-recourse loans to procure property in using retirement funds..

The question becomes one of what are others doing in order to strategically use RE to build retirement income and assets within their portfolios? Have others used non-recourse loans with success? Are they primarily doing flips and paying cash for deeply discounted props? Please help me turn a small pile of cash into a larger pile of cash!

[David Beard]

You can also borrow $50k (this is the limit) from the SD401k account and use this as downpayment(s) on rental property. You can then obtain much better terms using conventional financing rather than non-recourse financing. And the 401k loan payment will not count against you in underwriting. You will also build a track record on your tax return with this approach, which is very helpful in obtaining further financing .

Yes, you will have a $900/mth payment back to your 401k account (5 year max term fully amortizing). You can service this with the rental profits on the properties you acquire, or you can just use $40k of the $50k loan for down payments and make an immediate $10k payment back to the 401k to pay for the entire first year of loan payments.

What's nice with this approach as well is that if you also purchase property directly in your SD401k, and you need to make repairs to a property at a time when your cash in the 401k is low, you can make a payment from personal funds into the 401k in the form of a loan repayment, in order to generate the cash needed for the repairs.