Recently, I had the opportunity to cash out a portion of my 401(k), leaving me with $20,000 burning a hole in my pocket.

Backstory:We rent the ADU out regularly via STR or MTR and live in the main house currently and are looking to size up.

The size of the unit was perfect for Airbnb or travel nurse mid-term rental.

With that, yeah $20 per mnth per door, it's a bit expensive but you are at a rather small size and positioning not for this size but growth, growing ain't cheap right. 

Rentals create cash flow, and that's what we want as real estate investors, but you need cash on hand for unforeseen circumstances.The AC needs to be replaced, that's $7K to $10K or more depending on the size of the house and if you have one rental, it will eat all your cash flow, same to replace a roof, etc, or if tenant trash the home, you need money to fix it again.To me personally a nice rental portfolio that is healthy consists about 10 units, so if you have an issue with a house the portfolio can cover the repairs and still healthy, but when starting you need to have cash on hand just in caseYes, there are multiple strategies you can use to hack your way to buy your first rental with minimum cash, but I would start wholesaling or fix and flip a few deals to create that cash as fast as possible

My advice would be to take a small portion of that $250K and use it as a down payment.

They may be thinking about the qualified vs nonqualified use of the home and either taxing the entire gain or a portion of it.

ThanksSandeep Hey Sandeep, Depending on your FICO, DSCR ratio, loan amount size, and property location, you could get a much more favorable rate at a similar LTV and term 

If you have a decent sized lot, you may want to check and see if your municipality allows for building ADUs.

They also do smaller multi's.We recently bought 4 acres & are tossing around the idea of down sizing into a modular ranch.