With the housing market hitting all-time lows in sales and prices, some people are considering the option of emptying their 401k plans in order to pay all cash for investment real estate properties. Using cash from retirement savings to purchase a rental property outright could generate hundreds of dollars in monthly cash flow, which could then be put into a Roth or other retirement vehicle.
These people figure that the return on investment from the rental income would be greater than any retirement fund could earn. For people who are young enough to raid their retirement, meaning those in their 30's, this can make sense, as long as they continue to their 401ks as they have in the past after they take the real estate money out. However, they need to realize that renting houses out is not as easy as it sounds. There are no guarantees in the rental business, and finding decent tenants can be tough.
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