Rental Property Investor · Baton Rouge, LA · Member since 2019 · 38 posts · 7 votes
Hi guys,
i'm looking for an advise in how to remove money from my 401k in order to invest in a property. it is possible to remove money with out getting hit with fees? if i have an LLC can i transfer the money to the business account? Please advise
@Irwin Velez if you are employed, you can borrow against your 401k (I support certainly if you are going to stay for five years in your job until the loan is paid back), the interest is paid to yourself-it is low like 4.75%. Nominal fee (like $50 maybe) only. You can borrow up to half of what you have in your account, $50,000 max if you have $100,000 in your 401k. Aside from that... you would have to do a hardship withdrawal.... Don’t let people scare you out of using your own money... Keep contributing to your 401k to get the company match, but other than that, blow the 401k up at this point I think, don’t let Wallstreet 401k bankers make you think you can’t use your own money.
I use my 401k to help me in real estate as often as possible. I know how to buy right though. Good luck!
It is not possible to avoid taxes when removing money from 401k. On top of that you will owe penalties if you take early distribution (before retirement).
What you could do is set up self-directed IRA, perform a direct rollover from your 401k, then you can buy an investment property inside of an IRA. Please note that the IRA would own the property, not you personally, therefore you won't be able to benefit from the income property produces, all income belongs to the IRA. Self-directed IRA is simply a tool allowing you to invest in alternative assets with all other rules (contributions, distributions, taxes, etc.) pertaining to IRA in place.
Usually you would be able to perform such rollover from previous employer 401k, if the 401k you are referring to is with your current employer - it is unlikely they will allow you to move those funds.
You can withdraw the money but you do not want to take ownership of it (you will pay the penalty). You want to move it to a SDIRA or solo 401k (no penalty). Do not transfer the money to your business account.
Is this 401k from a previous employer or your current employer? This info is needed to determine if you are able to do this.
@Irwin Velez if you are employed, you can borrow against your 401k (I support certainly if you are going to stay for five years in your job until the loan is paid back), the interest is paid to yourself-it is low like 4.75%. Nominal fee (like $50 maybe) only. You can borrow up to half of what you have in your account, $50,000 max if you have $100,000 in your 401k. Aside from that... you would have to do a hardship withdrawal.... Don’t let people scare you out of using your own money... Keep contributing to your 401k to get the company match, but other than that, blow the 401k up at this point I think, don’t let Wallstreet 401k bankers make you think you can’t use your own money.
I use my 401k to help me in real estate as often as possible. I know how to buy right though. Good luck!
Yep, 401k loans are awesome. No downside, in my opinion. I have done 2 in the past, one to pay off my student loan and the other for the down payment on my first home. I'll probably do another soon to get my first hunk of cash to do a BRRRR deal.
Risky idea. If you lose your job, you will have ~30 days to repay the loan. If you do not, the loan will be treated as a withdrawal subject to a 10% penalty and income taxes.
Risky idea. If you lose your job, you will have ~30 days to repay the loan. If you do not, the loan will be treated as a withdrawal subject to a 10% penalty and income taxes.
This is one of the reasons I prefer participant loans from self-employed Solo 401k plans.