Investor · Minneapolis, MN · Member since 2019 · 5 posts · 0 votes
I plan to buy my first multi family property very soon. The problem is I don’t have hard cash. I How can I get enough cash to buy it? How can I get the lowest interest rate? I have some equity in my current house (estimate 100k) and some money in 401k. What is the quickest way to get cash to buy the property ? Is there a way to get cash available in 7 days? Please advices/recommend.
1) You can only borrow from your 401k if the plan allows you to do so - so check with the plan administrator.
2) If the 401k plan is through your former employer, you won't be able to take a loan. However, in that case and if you are self-employed with no full-time w2 employees working for you, you could set up a Solo 401k with a provider that allows for 401k participant loans, rollover the funds and then take a loan from the Solo 401k.
3) Here are the general considerations regarding 401k loans.
401k Participant Loans
If your 401k plan allows for 401k participant loans, the maximum loan amount is equal to 50% of the balance up to $50k. The repayment terms for a 401k participant loan are equal monthly/quarterly payments of principal and interest (typically prime plus 1%) over a 5 year term (longer if used to acquire your principal residence).
Please note that if you take a full $50,000 and then pay back the loan, you can't take another $50,000 until 12 months after the first loan was fully paid back.
Per the loan offset rules that went into effect with the 2018 Tax and Job Act: if you leave your job and the loan is current at the time you leave your job but then the loan goes into default because you left your job, you will have until your tax return deadline (including any timely filed extension) to make the loan current by depositing the outstanding balance into an IRA (and thereby avoid the taxes and penalties that would otherwise apply).
New York, NY · Member since 2014 · 37 posts · 19 votes
6y
You can refinance your house to get the equity out of get a line of credit from it. Also I believe you can borrow against your 401k. Go talk to your bank, the property local banks and local lenders can get you results faster.
Investor · Minneapolis, MN · Member since 2019 · 5 posts · 0 votes
6y
@My Nguyen
Thank you. I looks at the ads last week and it say it buys property and gives the money in 7 DAYS. how can I get enough hard money in 7 days to buy property?
Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
6y
@John H. many hard money lenders can close on a flip in 10 business days or less, but if you're looking at a long-term mortgage it will likely take closer to a month. Plus you'll probably need to at least have money for the down payment and closing costs so you'll probably want to get the money either from your property or 401k ready asap so it's ready when you need it. Otherwise you'd be looking at partnering with someone who can provide the funds which can be as fast as whatever you guys work out.
1) You can only borrow from your 401k if the plan allows you to do so - so check with the plan administrator.
2) If the 401k plan is through your former employer, you won't be able to take a loan. However, in that case and if you are self-employed with no full-time w2 employees working for you, you could set up a Solo 401k with a provider that allows for 401k participant loans, rollover the funds and then take a loan from the Solo 401k.
3) Here are the general considerations regarding 401k loans.
401k Participant Loans
If your 401k plan allows for 401k participant loans, the maximum loan amount is equal to 50% of the balance up to $50k. The repayment terms for a 401k participant loan are equal monthly/quarterly payments of principal and interest (typically prime plus 1%) over a 5 year term (longer if used to acquire your principal residence).
Please note that if you take a full $50,000 and then pay back the loan, you can't take another $50,000 until 12 months after the first loan was fully paid back.
Per the loan offset rules that went into effect with the 2018 Tax and Job Act: if you leave your job and the loan is current at the time you leave your job but then the loan goes into default because you left your job, you will have until your tax return deadline (including any timely filed extension) to make the loan current by depositing the outstanding balance into an IRA (and thereby avoid the taxes and penalties that would otherwise apply).
Lender · Frederick/Montgomery County, MD · Member since 2019 · 56 posts · 46 votes
6y
@John Huynh taking a loan from your 401k would be quicker, but it's not highly advised. The best route would be to apply for a home equity line of credit (not cash out the equity you have in your current property). With a HELOC, you can find banks that will offer you 80%-90% of your current equity. You only have to use what you need, and you will only have to make interest only payments initially. Many HELOCs will offer 10–15 years of interest only, and then term out the balance with P&I payments for another 10-15 years. If you cash out equity you'll have to make principal and interest payments immediately, which will only hurt your cash flow. The only downside is it's usually floating rate. You can usually opt for a fix rate, but the rate will increase by 1%-2% if you go that route. I look at borrowing from your 401K as a last resort. If you are desperate for the money quickly and have a wealthy friend or relative, you could always ask them them to front you the cash - if you've been approved for a HELOC you can tell them you are going through the process and will have funds available to repay them very soon. Make sure your approved before going that route.