Cash in 457 Plan to Pay Off Rental Property?

[Ryan K.]

Ok here’s the scenario and rationale:

My dad retired a few years back, he’s got a great pension. He parked his buyout money in a 457 plan.

He’s got a good rental property that fetches $1450 per month. What he owes on the property is what he has parked in the 457 roughly $80k. He was looking at refinancing the rental to kick off a higher cash flow.

As we were talking he said, “I could just pay off the balance and have even better cash flow and 100% equity. (The home is worth $275k).

Obviously cashing out would cause an income tax hit. But the CoC return, if he used the 457 to payoff the mortgage, would be a 14%. That easily outperforms the 457 year over year.

Just curious if anyone has seen anything like this or has experience doing it? Or are we totally nuts in our thought process?