Author Topic: Cashing into my Roth for a down payment on a rental?  (Read 547 times)


  • 5 O'Clock Shadow
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  • Location: Saint Paul, MN
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Cashing into my Roth for a down payment on a rental?
« on: July 25, 2019, 11:53:44 AM »
I am 24 years old and have managed to chunk in nearly 11k into my Roth IRA through work. I want to purchase a rental unit in an area of Saint Paul I believe is beginning to have increased popularity and starting to clean up quickly (pushing the gangs and crime out).

My investments into the Roth have netted me 17% ROI and I see a market dip coming in the next few years. My question is, If I can take my investment out of the stock market by borrowing from my Roth and invest in a down payment while interest rates are low, would this be a credible strategy? (Technically my money is still invested, I just skip the part of losing during the 'bear market') I wanted to buy once the housing market dips, but I feel there are many others who are waiting for the next housing dip as well which will make the market rebound very quickly.


  • Pencil Stache
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Re: Cashing into my Roth for a down payment on a rental?
« Reply #1 on: July 26, 2019, 10:11:44 AM »
You can't borrow against a Roth IRA. You can withdraw your contributions any time with no penalty but any gains you pull out will be taxed and penalized (except in a very limited set of circumstances which don't apply here), so don't touch those gains. Then you can only trickle 6k a year back in to the Roth (assuming you even have the funds to do so after buying this place). 11k in a Roth at age 24 will be worth a LOT at retirement age, if you can keep your hands off it. Retirement money you stash in your early 20's is worth way more than money you stash in there at 30 or 40, due to compounding.

As for the plan in general... I don't have strong opinion to offer. If you are well acquainted with the specific area and accurate in your guesses about the overall trends then there seems to be a good opportunity here but you are moving into the realm of speculation, rather than investing. I don't do well with those kinds of risks so I'm not a landlord (or even land owner). I'll let others make that case.


  • Walrus Stache
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Re: Cashing into my Roth for a down payment on a rental?
« Reply #2 on: July 26, 2019, 10:22:18 AM »
So you know thereís a market dip coming.
You know the area of St Paul thatís being cleaned up will continue its improvement and you know the rents will go up.
You know that there will be a housing market dip and you also know that other people are waiting for that dip.

You know a lot.
Do you have an emergency fund?
Do you own your own house? Are you buying a house to completely rent out or subletting one you are going to live in.
Do you have a fund set up to cover any repairs that need doing? Now and in the future?
Have you analyzed the property and market and do you know what return youíll get?

As above Ė from what you have posted you are speculating and donít even know what money is available to you.

I think you need to do a lot more research into rentals and also consider that instead of buying into a dip (if it happens) then why not just carry on buying shares via a 401k and maximize your investments there?


  • Magnum Stache
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Re: Cashing into my Roth for a down payment on a rental?
« Reply #3 on: July 26, 2019, 03:13:28 PM »
Generally with significant downturns in the economy/stock market/housing areas stop gentrifying or revert back to shitholes.

So you are actually betting (IMO) that there ISN'T a downturn by following this strategy.