Using a self directed 401k loan as a down payment - best way to exit?

[Tom Waddell]

Hi all. I'm going over my options to purchase a buy and hold investment property. I don't want to purchase the property inside my self-directed solo 401k, so I'm considering taking out a loan from the 401k and pairing that with conventional financing. I've searched the forums and read a lot of the pros and cons of using 401k loans as down payments. 

Assuming I pursue this idea, I can't find in the forums where anyone has mentioned the following:

1. Since a 401k loan is required to be paid off in 5 years, the payments are pretty high despite the low interest rate. Therefore, it's been extremely difficult for me to find a property that can even break even with this scenario, let alone cashflow after all expenses. I'm a newbie, so maybe I'm missing something here. To those who have had or are using 401k loans as down payments, how are you cashflowing with two loans on a property?

2. Is your exit strategy based on refinancing the property as soon as it has seasoned in order to pay back the 401k loan? I just can't see having this extra 401k loan on a property any longer than necessary since it's such a huge hit to any cashflow.

Thanks for any wisdom you can offer.