 Using a 401K loan to buy (by CJ [OH]) Feb 27, 2014 7:53 PM
 Using a 401K loan to buy (by Robert J [CA]) Feb 27, 2014 9:49 PM
Using a 401K loan to buy (by Pattyk [MO]) Feb 28, 2014 5:01 AM
Using a 401K loan to buy (by Sue [MI]) Feb 28, 2014 5:08 AM
Using a 401K loan to buy (by simba [WI]) Feb 28, 2014 5:51 AM
Using a 401K loan to buy (by Keith [AL]) Feb 28, 2014 5:59 AM
Using a 401K loan to buy (by Echo [GA]) Feb 28, 2014 6:51 AM
Using a 401K loan to buy (by CJ [OH]) Feb 28, 2014 8:54 AM
Using a 401K loan to buy (by don [PA]) Feb 28, 2014 9:00 AM
Using a 401K loan to buy (by Brad [IL]) Feb 28, 2014 9:18 AM
Using a 401K loan to buy (by David [MO]) Feb 28, 2014 11:28 AM
Using a 401K loan to buy (by Sam [CT]) Mar 1, 2014 6:42 PM
Using a 401K loan to buy (by CJ [OH]) Posted on: Feb 27, 2014 7:53 PM
Message:
State Specific Question About: OHIO (OH)
We purchased our first rental property with a 401K loan. We are basically going to be paying ourselves back the first five years of this loan, which is ok with us. I am doing my taxes and realize this might have not been the best decision, tax wise. I've learned we can claim the interest on this loan, but it would only be the first year. Does anyone have any tax advice when you buy your rental in this manner? Is there any way to speed up the depreciation on this property? --64.12.xxx.xx |
Using a 401K loan to buy (by Robert J [CA]) Posted on: Feb 27, 2014 9:49 PM
Message:
If you have to borrow money from your retirement account to come up with a down payment, it's not the best way to become a landlord investor. Owning property is like have another child, you never know when an emergency is going to happen and how much it's going to cost. Therefore if you don't have the discipline to save for a down payment, then maybe your not cut out to be landlords. Rarely an investment property has enough positive cash flow in the beginning to pay back
just the repair bills, maintenance and emergency repairs -- let alone a down payment too. --98.119.x.xxx |
Using a 401K loan to buy (by Pattyk [MO]) Posted on: Feb 28, 2014 5:01 AM
Message:
well you already did it and it may have been the right thing to do, keep asking and someone will come along with more information. I wouldn't beat myself up over it,
I 've usually found the benefits present themselves as time goes on, you did it, so it must have been right for you and i wouldn't question that now, just keep moving forward, five years will past before you know it.
Lot's of unknowns when one steps out of their comfort zone, YOU DID IT! and now you own it! And now you will start learning and growing and moving forward!!! Hope you learn lots and share! --184.239.xxx.xxx |
Using a 401K loan to buy (by Sue [MI]) Posted on: Feb 28, 2014 5:08 AM
Message:
Ouch - yes, it was not a good decision but it's done now. You need to talk to a real tax advisor about this. You should be able to deduct all the interest every year on your loan. Next time talk to a tax guy before you make decisions like this. --75.51.xxx.xx |
Using a 401K loan to buy (by simba [WI]) Posted on: Feb 28, 2014 5:51 AM
Message:
Its actually a great idea... I did it when I was in IT and it had nothing to do with needing money to do it cuz I already had other money... I looked at it like 'why not take a 20k loan which I pay off in 5 years at like 10 percent or whatever it was' AND 'you are paying back yourself 10 percent profit cuz it stays in your 401k and in 5 years you now own that 20k PLUS your crib should be worth possibly another 40-50k if you did your rehab and updates correctly AND of course bought correctly...
The thing I tell all my friends that HAVE to go to work everyday and work all year for their TWO weeks vacations is BUY ALL YOU CAN WITH WHATEVER AMMO YOU CAN GET YOUR HANDS ON!!!
Don't buy a 20-30k car when you can buy a cheap sfh with that 20-30k... This cheap sfh will not only pay now for your new car payments but when the 5 year loan is up on your bad investment (CAR), you will now also be up 40-50k plus on your investment that payed for your car AND you will have income for the rest of your life...
GET MONEY FROM WHEREVER YOU CAN AND BUY CRIBS.... YOU WILL ONLY PROFIT IF YOU INVEST WISELY...
Cheers,
Simbo Bimbo Out --99.88.xxx.xx |
Using a 401K loan to buy (by Keith [AL]) Posted on: Feb 28, 2014 5:59 AM
Message:
I am thinking like cimba. If you are paying yourself back the interest. Then it's really not a loss. You made the right choice as long as you got a good house at a good price. --98.89.xx.xxx |
Using a 401K loan to buy (by Echo [GA]) Posted on: Feb 28, 2014 6:51 AM
Message:
I don't see a problem with taking a loan against your 401K, as long as you are disciplined enough to make the payments. As far as interest deduction goes. My CPA says you can deduct as long as there is no mixed funds and he calls it interest tracking. However I don't believe him from everything I've read. So if and when I ever do this ( I plan to) I don't think I will chance it and take it. But all that said. You are paying yourself interest instead of the lender. Its still a win to me. So you pay yourself 1K in interest or you get to take off your tax base of 1K to a lender. --98.94.xx.xxx |
Using a 401K loan to buy (by CJ [OH]) Posted on: Feb 28, 2014 8:54 AM
Message:
Thanks for all the comments. Yes, we did get an awesome house at a great price. And yes we are learning lots along the way. So far we have had great tenants, but when going into this, everyone and I mean everyone commented that you have to get "good tenants" then everything goes more smoothly. I am using Turbo Tax Premier to do my taxes, I find it very user friendly. Always did my regular taxes with Turbo Tax, so I feel I have a "grip" on the whole tax situation, but still need a clear answer on the interest deduction on our 401K loan. We took out 35K with a 4.25 interst rate over 5 years. Can we deduct the entire amount of interest in one year or are we to report whatever interest we paid in that year and report whatever the yearly interest is over a 5year period. I love this Q&A Forum and appreciate all the responses. --64.12.xxx.xx |
Using a 401K loan to buy (by don [PA]) Posted on: Feb 28, 2014 9:00 AM
Message:
Now that you are an investor, forget Turbo Tax and invest in the services of a cpa. --68.81.xxx.xxx |
Using a 401K loan to buy (by Brad [IL]) Posted on: Feb 28, 2014 9:18 AM
Message:
This is how I do it. The interest to the non-mortgage loans goes into line 13 on the Schedule E. As long as I am paying interest to that loan I am claiming on the Schedule E. --50.203.xxx.xxx |
Using a 401K loan to buy (by David [MO]) Posted on: Feb 28, 2014 11:28 AM
Message:
I saw the title of this question and thought that this might not go to well. But pleasantly surprised. I like it when people can accept people for the things they do. Although you all might not agree with CJs actions, you were able to keep it positive and give some good advice. I had once thought about this, but was too risky for me. Simba, IT like Information Technology? I'm in IT too. Like your posts, btw. --65.197.xx.xxx |
Using a 401K loan to buy (by Sam [CT]) Posted on: Mar 1, 2014 6:42 PM
Message:
Looks like everyone skipped over part 2 of your question about depreciation. You can depreciate appliances over a shorter time period. So if the house came with a stove and refrigerator, you should depreciate them over 3 years and deduct the value you declare for them from the basis of the house. This obviously works better with multis where you are getting 3 or 4 stoves and fridges ande maybe dishwashers. --69.116.xxx.xxx |
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