Would it be better to spend 25,000 of my 401k to buy a house cash or try and finance it and keep money in bank to be lost possibly in stock market? Thanks
What is your time horizon for being in the market?
Depends on what your return on investment will be. If by using cash you are guaranteed at least a 200% return ($50k) it may be worth using that cash. If it will be less than 200%, I would use credit, but only if you’re able to get the house for at least a 25-50% discount.
what is your plan for the house, to live in or as an investment?
Its 25000 for a rental that will get 500 a mth.
Worth doing if you got a loan for the 25k, if you’re writing a check for 25k you’ll need to get a much better return. Invested correctly you can take the same 25k and make 250k out of it in 12 months. Check out other options
With the average return on the stock market since the beginning is running at around 11% and a $25,000 property will rent for $500. You would have roughly $5,000 a year coming in if you figure in your vacancy loss rate and a few inexpensive repairs. If the property was in great shape meaning no major expenses in the next 10 years, then on $25,000 investment, you would be making a 20% cash on cash return the first year and in the years to follow. 20% beats the market hands down and this does not figure in the your opportunity for excess cash gained after the sale if you can buy the property far below market value. Not to mention the tax deductions and oppurtunities for doing a 1031 exchange after a couple years of ownership.
If you want to be a landlord it may not be a bad deal. Sure you may be able to leverage yourself and use some other strategies but will you?
that 5000 wouldnt all be your gain. 500X12 = 6k - vacancies, taxes, insurance, repairs, court costs, misc.
you return would be more like 10% = $2500 / year maybe $3500 if your lucky.
investing in the market is hard especially with your timing now. If you had asked last week, hands down your best bet woulda been in the stock market. only for a short term gain then use that cash for properties.
will you have a penalty for withdrawing now from your 401k ??
your return on investment will be. If by using cash you are guaranteed at least a 200% return ($50k) it may be worth using that cash. If it will be less than 200%, I would use credit, but only if you’re able to get the house for at least