Home Equity Loan – Still a Better Idea Than a 401(K) LoanWritten by Charles Essmeier
Anyone who borrows money is always looking for cheapest source of funding. That makes sense; no one wants to pay more in interest than is absolutely necessary. And anyone with a sizeable amount of debt, such as credit card debt or a student loan, would be wise to consolidate their debt with a lower interest loan. One source of such a loan is a 401(K) account, which many consumers may have through their employer. Since interest rate on Federal student loans rose on July 1, many students who missed that deadline may be wondering if consolidating through a 401(K) loan is a good alternative. Is it?
In a previous article, we have outlined several reasons why borrowing against a 401(K) account may be less favorable than using a home equity loan instead. The reasons include fact that interest on a 401(K) loan is not tax deductible, and that borrower loses ability for his or her investment to compound over time. If you have borrowed money, it can’t earn interest and cost over twenty or thirty years could be dear. In addition to those, there are other reasons why a home equity loan would be a better source of consolidation funds.
The 401(K) loan is tempting. There is no credit check, interest rate is usually favorable, and you are paying
Booming Real Estate Profits From Baby Boomer InvestingWritten by Chris Anderson, PhD
In last week's article, called "Irrational Exuberance, Part II?," I discussed some of our concerns about what is happening in preconstruction investment real estate market. What many people have asked me is "if you're so concerned about real estate market, then why invest so much with yourself and with preconstruction MasterMind Group?" The answer to this is really quite simple: we find preconstruction projects that make complete sense EVEN WITH current market conditions. Many people think about markets as one big entity and you either decide you are in or out. In preconstruction real estate, this is dead opposite of how we think. Instead, we look for preconstruction investment opportunities that make complete sense in this market and then, if we are wrong, we look (in advance) for ways to exit with our skin still attached. In this week's article, let's explore such a scenario. If you have been on one of our teleseminars, you have probably heard me speak about "Baby Boomers" and impact that they are EXPECTED to have in southeast and southwest. Without getting overly technical, here is short story: "We have an incredibly large % of our population moving towards retirement age over next 15 years; "A large % of these people have no intent on staying in their current locale; "Even though many boomers are ill prepared for retirement, there is still a significant % of people with tremendous wealth; "These people want to live in places with good "lifestyles. With that body of knowledge above, you can make great preconstruction investments however most people want to overly complicate things. So let's look at a typical conversation after someone has been exposed to baby boomer investing. Q: How do I make a good preconstruction investment with minimal risk? A: Well, from above, it really is pretty simple. Find a place that boomers want to live, then buy, and wait. Q: But what if price drops because of all investing going on right now? A: If you believe you truly have a place that boomers want, ignore it and ride it out. With that many boomers (demand) looking for so few properties (supply) in a few years, you will likely do just fine. Q: So when will I see a good return on my preconstruction investment? A: I don't know. Maybe this year, maybe 10 years depending on what you buy, market conditions, etc. From baby boomer investing mentality, we just know that there is a large PROBABILITY that somebody is going to want that property badly within a 15 year window. Q: But I don't want to wait that long. How can I get in and out in a couple of years or less? A: Well this is a horse of a different color. So not only do you want to invest in boomers but you want to time when they are coming. That is a little harder but still doable. Now what you are saying is that I buy now and once I buy, for some reason a lot of boomers start jumping at chance to buy in. The only way I know this can happen is if for some reason, there is a lot of people suddenly going to become aware of your property. In this case, you are strongly relying on somebody's marketing to bring "eyeballs" to your preconstruction investment. Q: Is there risk in this type of shorter investment? A: Of course. You could buy in, and lending rules change, or suddenly we start seeing horror stories in other regions about people losing money in real estate, and then on a short term basis, your preconstruction investment may decrease in value. As they like to say on Wall Street, that is not a loss until you sell. If you truly believe in longer term, then your decision might be to exit quickly or just wait until boomers start looking where they are going to live. To me, it is very comforting that I know that I have that backup plan.