Financing
We are getting ready to buy a rental property which will be rented to my mother. we are buying as an investment also but mainly to get her in a better area. we live in Il. we have the chance to pay cash for the property with borrowing from from 401k and some avail cash. we will repay the 401k from the sale of another rental property in NC next year. Is there any advantage to taking out a mortage at 7% (lowest we could find for a rental property) or should we borrow from the 401k and pay cash?
Depends on the rate of return you are earning in your pension account. If you are making more than 7 pct you will be ahead if you borrow at 7 pct. Otherwise opposite.
Not only rate of return on the 401(k) but also the significant penalties you are likely to pay for the withdrawl of the funds. See your CPA.
No penalties. We are allowed to borrow and the interest rate is 5.5%
Quote:
On 2003-09-23 10:55, lisswh wrote:
We are getting ready to buy a rental property which will be rented to my mother. we are buying as an investment also but mainly to get her in a better area. we live in Il. we have the chance to pay cash for the property with borrowing from from 401k and some avail cash. we will repay the 401k from the sale of another rental property in NC next year. Is there any advantage to taking out a mortage at 7% (lowest we could find for a rental property) or should we borrow from the 401k and pay cash?
The best person to get advice from on this site for the issue I believe is DaveT...send him a PM and should be able to advise...