Hello everyone, I’m DJ from southeastern Illinois. I’ve been on this site for several years just have never posted. Finally decided to get my account activated again and participate more. I have a couple financial questions about buying my first piece of ground. This site has more knowledgeable guys on it than any other hands down! I have been saving for several years to purchase my first piece of property. A piece of ground that I didn’t expect to have the chance to purchase from my family came up. It’s my aunt and uncle‘s 30 acres that borders my 10 acres where I live. It’s not ideal hunting, but everyone I keep talking with tells me I’d be an idiot not to go ahead and purchase something that touches what I already own on three sides. So my question is, would it be wise to pull out of my 401(k) to help buy this piece? That way if another piece that I really want comes along I haven’t used any of my savings. I can pull 50,000 out of my 401(k) without a penalty. My wife has a 401(k) from a former job that has 95,000 in it that is not getting anything contributed to it now. I thought about liquidating it and putting it right on top of the down payment for this also. Then I’d be put in roughly 110,000 down on this piece without using anything from my savings. This property is 30 acres with 21 tillable in three different little patches that are split up by tree lines and ditches, which I would put into a CRP program to hopefully get some income from that. It truly shouldn’t cost too much per month after putting that much down which would keep my savings freed up for a piece that I really want. Any opinions on using money from your 401(k) would be appreciated. Thanks DJ
Not sure what penalties or costs are for taking out of 401k or how it might compare to scenario where bank lends u money. Not sure if they would give you a loan for all of it based on equity.
but on the personal side of 401k vs land …. That’s your call of course. I’d rather be in land so I’d probably do it. & clearly there’s a longer discussion on rebuilding the 401k or maxing out a Roth later on to diversify if that’s what someone wanted to do
On the bigger issue…. 30 acres that borders u, that u want - that I presume u can buy reasonably…. I’d get it done every time if I were able. I can’t think of anyone I’ve known that regretted buying in those scenarios. All or almost all I know have regretted not buying ground bordering them. & the reality- purely financial …. U buy this 30 “right” & u spend some years making it better …. Long term u likely would do extremely well if u decided to sell it. So even at an investment level- IMO - those scenarios are good moves.
but on the personal side of 401k vs land …. That’s your call of course. I’d rather be in land so I’d probably do it. & clearly there’s a longer discussion on rebuilding the 401k or maxing out a Roth later on to diversify if that’s what someone wanted to do
On the bigger issue…. 30 acres that borders u, that u want - that I presume u can buy reasonably…. I’d get it done every time if I were able. I can’t think of anyone I’ve known that regretted buying in those scenarios. All or almost all I know have regretted not buying ground bordering them. & the reality- purely financial …. U buy this 30 “right” & u spend some years making it better …. Long term u likely would do extremely well if u decided to sell it. So even at an investment level- IMO - those scenarios are good moves.
deerdown
Well-Known Member
Some of the best advice you'll ever get..... Right here...
First thing.... talk to CPA. Im not familiar with any loopholes allowing you to pull from 401k without penalty.
Ask about converting your wife's 401k to a self directed ira and purchasing the ground thru the IRA
Ask about converting your wife's 401k to a self directed ira and purchasing the ground thru the IRA
Thanks for all the replies so far. As for pulling out of my 401k it’s technically a loan from myself. I am able to take a 50,000 loan from my 401k which i will be paying back essentially to myself. I will also be paying interest on it but the interest also goes back to my 401k. I have to pay it back in five years. In my pee brain it kinda seems like free money to play with since it’s already there and I will just be paying it right back. I am definitely going to look into the IRA for my wife 401k! Thanks again!
Windlooker
Well-Known Member
I pulled from my 401k to buy my first piece. Best thing I ever did. Like you I paid myself back per the rules through small wage garnishments. No penalty. Again, I would go for it.
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Ditto here! No applications or waiting on banks. Check was here in 2 days and interest rate is much lower. Think there is a $50 fee and no penalties. Think of it as just being a part of your future retirement portfolio!
Hardwood11
It is going to be a good fall!
If you can work that out, you won’t regret the purchase! If it has 21 tillable you can income to pay for it & improve it if you want !
Good luck & keep us posted !
Good luck & keep us posted !
The balance you pull out also doesn’t compound while it is borrowed I believe. A couple things to inquire about is how long the repayment terms are on the 401K loan? Another thing I would consider is what rate of return you are getting on your savings. I would consider using the current savings for the down payment on this transaction if the interest rate you are earning is less than what the bank rate is. You could always borrow from the 401K later if you have not rebuilt the savings when you find the perfect property in the future that you have been building the savings for. If this family transaction is below market price by chance I would sure consider buying it.
yes, 401k loan much different than a withdrawal. Do it to it!
A 401k loan has a penalty but youll be paying the majority back to yourself with the biggest loss being that missing money (removed+penalty) not earning. This said, take it if thats your best option as a down payment. I would also chat with the rural bank and agencies like Farm Credit on first time land loans, ag loans if applicable, etc. Have you asked your uncle about paying him direct? Regardless, Youll regret not buying it as everyone above has said.
Windlooker
Well-Known Member
You’ll recover the money you use from your 401k and you’ll diversify your portfolio with the land purchase that will increase in value. No brainer.
Hawkeyebowhunter
New Member
That's what I'm looking at doing as well, I'd much rather pay myself back 7.75% over 5 years, considering the loan roughly matches what I was contributing to my 401k anyway. Plus that way it doesn't decimate my savings account.
I would really look at the acreage you mentioned putting in CRP.In my area I can make more off farm ground than CRP but I still had alot in over the years and my last piece just expired.There is alot of luck on CRP that is getting someone good to work with.I didn't renew my wetland because they said I had to have a high amount of forbs and they inspected every 2 years.The cost for the seed was more than I made in 2 years.Forbs drowned out when it floods or get choked out from NWSG. If trees and shrubs maybe if n long term owned land. I did plant around 3000 trees and 5000 shrubs through NRCS.