Is it a good idea to pull money out of 401 K and invest in real estate? Raj

Asked by Raj, 75035 Sun Feb 26, 2012

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11
Kathy Hines…, Agent, Frisco, TX
Mon Jun 17, 2013
If you are looking for downpayment money and have a 401K, this is a great place to start. Home ownership builds wealth and security. Lets talk about it.

Kathy Hines / Broker

Keller Williams Dallas Preston
http://greathomedeals.kwrealty.com/
0 votes
Tonya Peek, Agent, Frisco, TX
Tue Feb 28, 2012
Raj, With interest rates at their lowest I would borrow from your 401k as a last resort. You only need 3.5% down payment with FHA so a home around 271k and can get up to 6% seller contributions. 5% down for Conventional with max being 470k.
I would suggest you get with an educated financial planner before you pull money from your 401k
Web Reference:  http://tonyapeek.com
0 votes
, ,
Mon Feb 27, 2012
If you borrow against your 401k and then leave your job, that loan will come due. Since it is secured by that 401k, it will become a taxable event for you when they pay it off. Just something to think about as you analyze your goals.

Barbara Coker
NMLS#228545
Licensed Mortgage Loan Officer
0 votes
Susie Kay, Agent, Dallas, TX
Sun Feb 26, 2012
Raj,

It's best to consult with a financial advisor. Taking your money out from your 401k should be the last resource. With 401k you can invest your money in a lot investment vehicles that will give you a higher return where home values in the North Dallas area has been flat last year. Of course it all depends on what you have in mind and your goal for purchasing the home.

Some financial advisors get their commission from mutual fund companies by recommending that specific funds, some don't and charge a flat fee. I would recommend the one who doesn't get commission from the mutual fund company. The good one should be able to give you advice on how to diversify your portfolio (yes, you can invest in REIT) and then charge you for their advice. You can even ask them whether they got paid by the mutual fund companies by recommending the funds or not.

I hope this helps!
Susie Kay, GRI, CHMS, SFR
Realtor®
Residential/Commercial/Investment
English-Indonesian-Hokkien
------------------------------------------------------------------
United Real Estate
III Lincoln Centre, 5430 LBJ Freeway #280
Dallas, TX 78240
469-371-2899
susie_k@att.net
http://www.dfwdreamhomes.net

Servicing your real estate need is my priority!



Susie Kay, GRI, CHMS, SFR
Realtor®
Residential/Commercial/Investment
English-Indonesian-Hokkien
------------------------------------------------------------------
United Real Estate
III Lincoln Centre, 5430 LBJ Freeway #280
Dallas, TX 78240
469-371-2899
susie_k@att.net

http://www.dfwdreamhomes.net

Servicing your real estate need is my priority!
0 votes
Dallas Texas, Agent, Dallas, TN
Sun Feb 26, 2012
Recommend to speak with your financial advisor.

Lynn911 Dallas Realtor & Consultant, Credit Repair Advisor
972-699-9111
http://www.lynn911.com
0 votes
Bruce Lynn, Agent, Coppell, TX
Sun Feb 26, 2012
Raj,

It depends on your goals and dreams and timeframe.

Normally I would not suggest pulling money out of a 401k due to the tax implications. You pay a hefty penalty to withdrawn money.

I do like investing in addition to the 401k.

Now if you are talking about borrowing to buy your own home and not rentals, I still would like to see you save for a down payment separately, but might be ok from 401k depending on your circumstances.
Web Reference:  http://www.teamlynn.com
0 votes
Albert Elhage, Agent, Austin, TX
Sun Feb 26, 2012
It depends on your objective. Are you looking for cash flow, equity growth, both? how close to retirement age are you? what percentage are you thinking of investing? A financial analyst with experience in REITs should be a stop for you for advice.

Good Luck
0 votes
Annette Law…, Agent, Palm Harbor, FL
Sun Feb 26, 2012
Raj,
Your goals, situation, age, and investment type will have a enormous bearing on what would be best for you.
The only one who can suggest the right path for you is someone who has knowledge of your investment goals and financial situation,..... your investment counselor.

For many citizens the taxes incurred from pulling funds from an IRA will make this an incredibly expensive option. Clearly, how much your money is currently earning, how much it can potentially make' minus the costs of converting your funds is somewhat important. Making $150,000 or more available for 6 to 9 mo real estate investment can generate profits that make the cost of converting insignificant.

Be very aware, you can use your 401K funds to invest in real estate to super charge your retirement savings and incur no penalties at all. There are several options for retirement specific options. These options could allow you to allocate your current 'cash flow' differently.

There are options that can and do work. well..DEPENDING ON YOUR SITUATION.

Consult your financial planner regarding how to leverage your 401K. IF your financial planner has no suggestions, ..sigh....you're talking to the wrong one.

If you truly run out of direction drop me a note and I can send you to more resources to gather more information.

By the way, 'Invest in real estate' is too galactic a term to have any meaning. More detail would be needed.
Web Reference:  http://www.MyDunedin.com
0 votes
Raj, Home Buyer, 75035
Sun Feb 26, 2012
Thank you Helen and Sherry for your prompt response! I appreciate that.

Actually when I wrote "pulling money out of 401K" i meant taking loan from my own 401K portfolio, in that case I guess, I don't have to pay any penality. I hope I am not wrong in my assumption here. Raj
0 votes
Helen Karuba, Agent, Dallas, TX
Sun Feb 26, 2012
Pulling money out of an IRA will create tax implications and possible penalties! Speak with a tax professional before you do that. Having said that...There are wonderful, self directed IRA's that allow YOU to purchase,sell, lease and manage real estate within the IRA portfolio making the capital gains tax free until withdrawn. You can do this in a traditional as well as a Roth IRA. A wonderful plan. The standard IRA providers don't talk about them much, and you can see why. They want to earn the management fees. But, you don't want your profit to be matched by your tax penalties.

It is a wonderful time to purchase investment properties. You can also wholesale or flip real estate now using "hard money lenders" where they use the property as total collateral. That's transaction funding and could work for you...allowing you to keep your 401K in tact AND invest, the best of both worlds.

I work with investors quite a bit who are doing the same thing you are considering. If you would like a referral to the IRA's I am talking about, let me know. They have informational seminars that are free.

Thanks
Helen Karuba
Virginia Cook Realtors
hkaruba@virginiacook.com
214-534-2020
0 votes
Sherry Renfr…, Agent, Frisco, TX
Sun Feb 26, 2012
Hi Raj-

I think now is the right time! I have several investor clients that are currently doing the same thing. Between commercial and residential and the anticipated up turn in the North Dallas area, now is the perfect time to invest in real estate.

My residential investor has already taken his 401k and invested in several properties, focusing in the Frisco area, since that is where the fastest growth is estimated.

If you are interested, email me or text me and I will go over some of the research data I have show you where the analysts anticipate the growth will occur in the North Dallas area. I would love to work with you and assist you in your real estate investment purchases.

Best regards,

Sherry Renfroe
Ebby Halliday Realtors
(214) 215-4145
sherryrenfroe@ebby.com
Web Reference:  http://www.sherryrenfroe.com
0 votes
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