There will be interest on the loan and you'll have to pay it back for five to ten years in one to two percent above the prime rate. However, this is favorable if you are doing fixer upper because you can refinance to quickly pay back your loan after the rehab. These are some of what you can profit from 401K real estate investing and you can get some tax benefits with your IRA if done properly. There is also another alternative where you can finance the down payment by using your IRA balance. One of the benefits when you go for this sortof investment is having a "non-cash" source for your capital and also if done right. When your account receives a monthly rental income from the purchased property, you can avoid income tax with that. You can overturn your 401K to a Roth IRA or a self-directed IRA. Otherwise, you will default and pay the taxes including the ten percent penalty for early withdrawal in case you'll not be able to pay the full balance. Another option is to covert to an IRA and directly buy a property. This is better than just making a withdrawal which will set off a ten percent penalty plus the amount added on the withdrawal.
Who Voted for this Story Another option is to covert to an IRA and directly buy a property.
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