I currently have two rental properties, one of which is on a property zoned multi-family. I have a background in construction and have reached out to some financial institutions to provide a loan for construction of a quadplex on my existing rental property. The bank would require 20% equity of the final construction cost.
I am considering withdrawing $100k from my 401k to make up some of my 20% equity; the remaining would be from cash and stock I could sell.
Under normal conditions I would never consider a 401k withdrawal, but with the temporary benefits provided in the CARES act it has really been something I’m considering. Not only would I avoid the 10% penalty for early withdrawal, I could spread the tax liability over three years. Also I believe I have three years to repay the withdrawal should I come into money down the road and could revise my previous tax filings.
As an FYI, my wife and I qualify for the special relief due to loss of income during the Corona virus (both of us have had our salaries cut).
I’d appreciate your thoughts about this. I’ve talked myself into it because I’m exempt from the penalty and because I could leverage the 80% the bank is willing to loan me for additional wealth building.
Submitted August 08, 2020 at 09:28PM by blhuber https://ift.tt/2XCt8SH
