How to buy securities

how to buy securities

Things You'll Need

Loan designed for 401k real estate investment

Instructions

Research the rules for your specific 401k. There are restrictions regarding how much you can borrow against your 401k, with most financial institutions placing a maximum of $50,000 on the borrowing. This means that you cannot plan to borrow against whatever cap is placed on your individual 401k.

Research available real estate. Regardless of market conditions, investing in real estate can be a risk. In a tough economy, investing in real estate is an even greater risk, and you will need to prove to your lender that the real estate is a wise option and will see profit in the near future. Most experts advise against any type of long-term investment with a 401k. The goal is to establish the investment, make the profit, and pay off the loan to avoid tying up the retirement account for too long.

Check into a real estate investment trust (REIT). The real estate investment trust provides you

with the opportunity to invest in real estate without doing the actual investing: the trust makes the decision about worthwhile real estate investments, taking the burden of making that choice up to you. Because the REIT is considered fairly stable, many lenders are more willing to provide a loan when you plan to utilize the trust.

Research and select a lender. Every lender is different, and some will be more amenable to the idea of utilizing a 401k for real estate investment than others. Keep in mind that your loan will likely come with other stipulations as well. Most important, perhaps, bear in mind that even though you taking out a loan against the value of your retirement account, you will still have to make any required payments based on the money you currently have–not in the retirement account. The 401k simply secures the amount of the loan. Your lender will need to know that you can make payments from the income you have outside the retirement account.

Source: ehow.com

Category: Bank

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