Newbie trying to get started

[Dennis Cerf]

Hello I am looking to get started in investing in real estate but I have a issue. Starting from scratch---I bought my first home almost 10 years ago, my plan was to stay in it for 3-5 years Refi to get my bills lower and then rent out. So as you all know in 08'-09' the market crashed, so that plan went out the window. Fast forward to now, the market is back up and now that I am trying to Refi again my DTI ratio isn't within range due to when I bought the house we used my wife income but she was not in the loan and now if we use her income she has to be on the loan but has bad credit. So! My thinking is this...pull 35k out of my 401k, sell a car and pay off the rest and also pay off all credit debt to bring down DTI, Refi my home, use some of the money to do some upgrades, rent out and then doing it all over again. My question is do you think this is a good plan to get into real estate? Sorry I know this is long and I may even left some things out.

[Dmitriy Fomichenko]

@Dennis Cerf Welcome to BP! Like other said, you will find a lot of information here and examples of other investors who used to be at the same place you are now.

I that you want to pull out 35k from your 401k. Keep in mind that the withdrawn amount will be tax at your income tax rate, plus a 10% penalty if you are younger than 59 1/2 years old. This can be quite a tax hit. If the 401k is with your current employer, you may not even able to do so. You can check with the plan administrator and see if borrowing from the 401k is an option, which is tax-free and penalty-free but requires payback within 5 years. The 401k loan will not affect your credit report or your DTI.

If the 401k is with a previous employer, look into the self directed IRA or Solo 401k options, which allows you to invest in real estate. If you can set up a Solo 401k, you can have the loan option too.