New to Investment Property

[John Sable]

I bought my first duplex in August of 2021.  I pulled money out of my 401 for the 25% down (80K).  Payment is $1500/month and rents are 3K.  I bought my second Duplex in February 2022. I pulled again from my 401K for the 25% down (80K).  Payment is $1500/month and the rents are $2100.  I am looking at a 3rd duplex now about the same scenario.  I do not want to pull anymore from my 401 for the down.  I do have a year reserves on the first duplex and about 100k of equity. I have 2 questions:

1.) Shouldn't I be able to refinance the first duplex and pull 75% of the equity out for the down on this 3rd duplex?

2.) Am I making a huge mistake using some of my 401 for these first two purchases

Thanks in advance for insight, opinion and advice.

[Zachary Cummings]

Hey @John Sable!

1.) You should be able to refi this, yes. Or if you have equity in your primary residence you can use this on either a cash out refi or a HELOC. Whichever route you go, I would make sure to account for the payment on whatever debt you decide to use.

2.) I think everyone has different goals and opinions on financing real estate. I think if you creates a plan that is going to lead to your success and accounted for every possible failure by having multiple exit strategies then that is all you can do. Everyone's aversion to risk is different so your thoughts of a good idea will be different for someone else's ideas. In regards to the 401k, if you have a plan to pay it back (if required) and factored this and any early withdrawal penalties (if applicable) into your numbers, and it made sense to you, then this is what matters. There are self directed IRAs that specialize in this sort of thing but you are not withdrawing the funds you are using them on real estate.

Hope this helps!