Even though your wife no longer works for the govt. you should ask the 401k administrator if they grant loans. I have an old 401k form govt. employment and i can still borrow from it. Also, if you borrow from your 401k they will liquidate $x from your account to convert to cash and then fund your loan. Depending upon your 401k investments and the current market state you may be selling securities at a very low point in the market and miss out on any run-up (if it ever happens) in security values while the funds are outstanding in your loan balance.
I will call the admin. to find out. Most money experts say never borrow from a 401k unless it is your last resort, but if I can acquire 1 or 2 properties at 60% ARV, the rent would be more than enough to repay the loans in 4-5 years. To me, it just seems the way to go. I know I could miss out on the beginning of the next bull market, but the prices of houses will be going up to offset some (or all) of that.
I used my 401K but only for for a short term loan. I got it at 4.25%. I would never depend on rents to pay it back, but I don’t know your situation. Mine is through my employer so if I lost my job, I would have to pay it back in full or it becomes taxable. I don’t see anything wrong with this tactic but be careful. You’re dealing with your own hard earned money for your retirement. I just thought I could make more with another rental investment as opposed to letting it sit there dwindling.
I just did it again, but last year when I did it (before bank loans got real tight), I got a 1st mortgage (8%) on the property w/o it being seasoned for 1 year. Put the 401K money back, paid off the the 2007 car and put a few $$ in my pocket. I still have a little equity left in the property but I’m moving on to the next one. All this was calculated BEFORE I purchased it.
I once took out a loan on a 401k. Typically you can only borrow 50% of the value of the 401k. They put the amount you borrowed into a secured fund/ fixed fund. The other part you can invest stocks. They charge interest on the loan, but you’re really paying youself back. Some charge a fee as a % of the total interest rate. Just keep in mind that if you lose your job or default on the pmts., you’ll be charged a 10% fee and you’ll have to pay taxes on the amount borrowed because its considered a cash out. This is unless you can pay off the loan in full.