Amid a Flurry of Potential Policy Changes Around Real Estate—The White House Has Walked Back Its 401(k) Downpayment Proposal
Summary
This article discusses potential investment strategies for real estate investors and touches on a now-scrapped White House proposal regarding 401(k) usage for home down payments. Hosts can leverage existing financial tools like 1031 exchanges, and explore down payment assistance programs, and creative refinancing options to fund real estate investments. Consider the risks of over-leveraging and seek professional financial advice.
Key Insights
- •Creative refinancing strategies include using savings from a refinance for a down payment, taking out a mortgage on a free-and-clear primary residence, and doing a cash-out refinance from existing rentals.
- •Down payment assistance programs are a growing tool for first-time homebuyers, potentially extending to one-to-four-family homes, thus allowing house hacking to offset mortgage payments and possibly turn a profit.
- •The article suggests exploring 1031 exchanges as a tax-deferral mechanism for real estate investors. It allows rolling one property into another, increasing net worth and cash flow.
Action Items
- ✓Consider exploring down payment assistance programs through State Housing Finance Agency (HFA) first mortgage programs to facilitate investment in one-to-four-unit homes.Effort: mediumImpact: medium
- ✓Evaluate your current financial situation to determine if creative refinancing could be a beneficial move to reposition funds.Effort: mediumImpact: medium
Tools & Resources
- →HUD’s homebuyer program hub: HUD’s homebuyer program hub links to each state’s homeowner and assistance programs.
- →Down Payment Resource’s Homeownership Program Index: Down Payment Resource’s Homeownership Program Index tracks more than 2,600 homebuyer assistance programs nationwide and provides a searchable, state-level list.
- →The Mortgage Reports: The Mortgage Reports is an invaluable resource for state-by-state guides to down payment assistance (DPA) programs.
Common Mistakes
- ⚠Cash-out refinancing existing rentals can lead to overleveraging if not managed carefully.
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