NEW Member ALERT!!! Advice on financing a rehab.

[James Bridges]

I have been interested in becoming a real estate investor for years. I read a bunch of the books and studied markets but never pulled the trigger (textbook: Paralysis by Analysis). I was paying a mortgage on my home a 2Bdrm/2Bath in Chicago. But we (my wife is my partner) could never save enough to pay for our expenses there, and have enough left over to buy additional properties. I finally actually took some real action and went through my VA loan officer and within a month or so got approved for an additional loan, (a bigger one) and that allowed me to purchase a 2 flat freshly rehabbed building. Since the property was so new, it was easy finding a tenant. I now pay around $650 to live in a 4Bdrm/2Bath beautifully decked out apt.

Here is my issue. I am still paying mortgage, gas, light, water in my old townhouse. I don't have savings to pay for the rehab it needs. But I am losing about $1000 a month on an empty home. I'd love to finish the rehab (around $15K) and even if I didn't make any money, if I could break even it would save me $1000 a month which could be used as seed for another investment.

I wanted to take a loan from my 401K (I got about 90K there) but I have a loan in default for $26K already so they wont let me borrow, until I pay that loan back. After I do, I can borrow up to $50K no questions asked. So here is my question, do I take out a cash out loan on my new 2 flat which has shot up in equity about 85-90K, of which VA gives you 100% value. Pay off the 401K loan and use that to BRRRR my way to financial freedom? Right now I am trading my time for money, working a ton of overtime, and risking my health I believe in the process to piecemeal this rehab myself.

I know its wordy for a first post but I appreciate ANY advice or welcome any different perspectives. Thanks

JT