Taking a loan from your 401k can be a smart financial move. Is it better to use the funds to invest in real estate or pay off debt that has a higher interest rate? That’s the first question I’m tackling on this Q&A episode!
On this episode of Investing in Real Estate, I’m sharing my take on the current state of the economy and then answering some great listener questions. We’re going to cover topics like deploying a 401k loan, the truth about high appreciation markets, and how to pay for repairs on your rental properties without increasing your tax bill. Click play to hear my answers to your questions!
On this episode you’ll learn:
- How to use your 401k funds to reach financial goals.
- What you should know about choosing a rental market.
- How to pay for repairs on your rental properties.
How to Use Your 401k Funds to Reach Financial Goals
If I were in this situation and trying to decide between paying off debt and investing with 401k funds, I would personally invest. A great piece of real estate is going to yield returns upwards of 18%. Plus you’re going to receive an appreciating asset and the tax benefits of investing. For me, the answer would without a doubt be real estate, every time.
What You Should Know About Choosing a Rental Market
In my experience as a real estate investor, I find that investing in bubble markets is a good way to get burned. I want to invest in markets that are stable and have long-term steady appreciation. I talked about the problem with highly appreciated rental markets in this video, The 10 Worst Housing Markets for Real Estate Investors in 2022.
How to Pay for Repairs on Your Rental Properties
I’m not a CPA, and I definitely suggest asking one this question about saving money for repairs without taking a big tax hit. But I can tell you what I do, personally… I don’t have an extra account that has a lot of reserves for repairs. Instead, I use a business credit card to pay for any extra expenses that pop up throughout the year. Additionally, it’s important that you consider other ways to reduce your overall tax burden. Check out this episode on The Buy Til You Die Strategy, and be sure to check out our friends at WealthAbility if you need a smart tax team on your side.
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The 10 Worst Housing Markets for Real Estate Investors in 2022
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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