Investing in Real Estate

If you have been thinking about investing in real estate this may be away to get started.  Beth is an excellent Loan Officer so give her a call if you have any questions.  I can help you with finding that perfect investment when you are ready.  So give me a call for more details at 630-234-8240.  Everyone be safe and keep warm out there.  
Posted by Dianne Yelm-Century 21 Affiliated
Should I Use My 401k for Real Estate InvestingFebruary 2015

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 are benefits to pulling money out of your retirement fund and using them to invest in real estate. For one, you may be able to avoid paying private mortgage insurance, or PMI, on your new mortgage by withdrawing enough funds to contribute a 20% down payment. We can take a look at your finances 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. Interest rates are low, housing prices are also generally low, and the economy appears to be improving. If you would like to discuss the advantages of owning investment property, please give me a call to set up a consultation and see how your investments can help you plan for the future. 

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

Beth Prickett
Mortgage Loan Officer
First Centennial Mortgage
2471 W. Sullivan Road
Aurora, IL 60506
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Dianne Yelm

Dianne Yelm

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