Feb 22 2015 5669 1

Feb 22 2015 5669 1

Image title
 

   
  Even during the housing crisis, financial experts agreed that real estate was still an excellent long-term investment. As the market is improving, that tenet still holds true. In fact, many people are transferring funds out of other investments and into real estate since interest rates and stock market returns have been so low. Pulling cash out of a 401(k) is a popular move these days. But is it right for you?

Withdrawing Funds

A 401(k) plan is a means for you to take funds out of your paycheck, pre-tax, and put them into a specialized savings account with certain rules and restrictions.* If you do decide to withdraw monies from your 410(k) in order to take advantage of the current housing market and invest in real estate, there are a few things you should be aware of:
  • 10% early-withdrawal penalty -- this is on the full amount you withdraw and applies to most people who withdraw funds before they turn 59 1/2.

  • Income tax payment -- you will immediately incur a tax liability on the amount you withdraw.

That said, there may be benefits to pulling money out of your retirement fund and using them to purchase an investment property. For one, you may be able to withdraw enough funds to contribute a down payment amount that would enable you to avoid paying private mortgage insurance, or PMI, on your new mortgage. We can take a look at your finances and valuate available programs to determine if this is a good choice for you.

Taking a Loan
Another option is to take a loan against your 401(k) funds. In general you can borrow up to half of the amount you have saved, up to $50,000. When you take a loan against your fund, you are able to use pre-tax dollars for your purchase, avoid early withdrawal penalties, and generally take up to five years to repay the loan. But remember:
  • The money you withdraw will no longer be earning toward your retirement.

  • If you leave your job, you will most likely have to repay the loan within 60 days.

Investing in Real Estate
It may seem complicated, but the benefits of buying real estate as an investment in your future may be worth it. Owning property has its own tax benefits. In general, property appreciates over time. And income from a rental may be used to offset the cost of the property and its upkeep.

It's a great time to buy property. Housing prices are generally low and the economy appears to be improving. As always, consulting a financial advisor is recommended before making any changes in your retirement investments. If you would like to discuss options for financing an investment property, please give me a call to set up a consultation.

*We are not a tax advisory firm or financial planning firm. Consult your financial advisors for more information.

 
 
 
     Eric Otfinoski
 Branch Manager
direct:(619) 665-2343
fax:619-821-2014
NMLS:254462
3965 Fifth Ave, Suite 230
San Diego, CA 92103
Email Me
Visit My Website


Colleen K. Cotter - BRE #01325265 Headshot
Author:
Phone: 619-804-6840
Dated: February 22nd 2015
Views: 1,213
About Colleen K.: ...

Property Search








RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Recent Blogs

5 Reasons You Should Consider Investing In Condos - Let’s assume, as an investor,
Best Places In Oceanside To Shop For Vintage Home Decor - When furnishing your home,
Jan 27 2017 29137 1 - Chinese Lunar New Year 2017 is
Get It Done San Diego - We all want to enhance our

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

Colleen K. Cotter - mySanDiegoAgent Realty Group
7050 FRIARS ROAD SUITE 100
San Diego, CA
619-313-4634
619-233-5526