401k, mutual funds, IRA . . . use it for real estate?

5 Replies

I've been actively looking for my first deal and in doing so I've been talking real estate around the office a lot.  One of my coworkers has expressed interest in investing with me but says that most of his money is tied up in various investment accounts.  What options does he have if he wants to get cash for real estate investments? Specifically he has:

401k: ~$110,000

Mutual Funds: ~$15,000 (was $30,000+ a few years ago)

Traditional IRA: ~$35,000

I've heard of moving money into a "self-directed IRA" but I'd like to hear from those with more experience. What's your recommendation? Thanks in advance!


@Ryan Moran

if the 401k is with the current employer the chances are - he can't use those funds.

Mutual funds can be liquidated and cash can be invested in real estate deal.

Using self-directed IRA to invest in real estate directly or to fund someone else's deal is very common. I suggest you search the forum for this keyword and you'll have enough materials to keep you busy reading for at least few hours :-)

Thanks @Dmitriy Fomichenko ! I wanted to make sure I was heading in the right direction.  I'll get to reading right now!

It is my understanding that if you invest in RE (rental property) in your SD IRA, you won't get the tax benefits you get when you buy a rental outside of your SD IRA. An alternative would be investing in a note in your SD IRA.

good info from all. It is true you might not get the same tax advantages from real estate outside your IRA , but that depends on several factors, however you will get other tax advantages from doing real estate in your IRA. I believe you should research the facts and make your decision based on your personal circumstances. I have been using self-directed IRAs with real estate for over 2 decades and find them very useful for building wealth. I also am a principal in a self directed company I liked it so much. If I can help you get the information you need or want, no charge of course, please feel free to call or email me.

In summary, see what you feel most comfortable doing before you jump into a deal. Always know another good deal is around the corner and it is not necessary to rush into any deal. Good luck 

@Ryan Moran

A solo 401k is also another tax shelter that is often used to consolidate retirement funds and then invested in real estate. Unlike an IRA, a solo 401k is for those who are doing, at minimum, self-employment activity.

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