Real estate agents targeting IRA/401K investors to buy RE

14 Replies

Any brokers/agents who specialize in finding investors and help them use their self directed IRA/Solo 401K to invest in buy and holds/income properties. Following are my observations and wanted to get your opinions-

  • I see so many 9-5 professionals with lot of money, especially those in their forties/fifties
  • Most of them are either unaware or think that IRA/401K investing in real estate is very risky

Considering the above, is this a niche to specialize? Target these people, and help them grow their retirement portfolio and help them buy rental properties every few years.

Any experiences/perspectives?

I know this is not what you are asking, but I'm not a big fun of using IRA/401k to buy real estate. It might be better to cash out, pay penalties and applicable tax, if any, and then use the money to invest "normal" way. Have you considered the pros and cons of using IRA/401k to invest in real estate?

Let’s mastermind this. 100% agree that it’s a great idea & win-win for all involved. 

Malgorzata Sadowska, Real Estate Agent in FL (#3313909)
(305) 204-2462

Many real estate syndicators, turnkey companies, and crowdfunding sites get a lot of their capital this way.

Ups and downs with real estate, indexing funds, builder stocks, loads of ways folks can diversify into real estate with better liquidity than owning parts of small portfolios. 

@Jay Pillalamarri

We work with dozens of real estate professionals and other investment providers that do exactly what you are proposing. The first thing is to become an expert in providing quality investments. If you have good product and a good reputation, then folks will want to invest with you. Then you want to identify a solid IRA provider that you can refer IRA investors to. It all starts with the simple question; "Did you know your IRA or 401(k) can invest in real estate?" Most folks do not.

The idea of investing in real estate is all about diversification.  If the retirement account is in a solid asset that provides consistent returns, then it will perform well.

Be advised that any reputable custodian will not provide you with marketing access to their client list.  You will need to find investors on your own.

Originally posted by @Soh Tanaka :

I know this is not what you are asking, but I'm not a big fun of using IRA/401k to buy real estate. It might be better to cash out, pay penalties and applicable tax, if any, and then use the money to invest "normal" way. Have you considered the pros and cons of using IRA/401k to invest in real estate?

Hi Soh,

I'm also a 401K investor and well aware of the benefits. So the question is not whether its beneficial or not but more like "what is your RE goals and if investing in RE makes sense for you or not. 

E.g. if you are flipper paying 25-30% taxes, you can easily avoid all those taxes by flipping inside an SDIRA or Solo 401K. 

Originally posted by @Malgorzata Sadowska :

Let’s mastermind this. 100% agree that it’s a great idea & win-win for all involved. 

 Good idea. Let's connect sometime next week and chat about it.

Originally posted by @Brian Eastman :

@Jay Pillalamarri

We work with dozens of real estate professionals and other investment providers that do exactly what you are proposing. The first thing is to become an expert in providing quality investments. If you have good product and a good reputation, then folks will want to invest with you. Then you want to identify a solid IRA provider that you can refer IRA investors to. It all starts with the simple question; "Did you know your IRA or 401(k) can invest in real estate?" Most folks do not.

The idea of investing in real estate is all about diversification.  If the retirement account is in a solid asset that provides consistent returns, then it will perform well.

Be advised that any reputable custodian will not provide you with marketing access to their client list.  You will need to find investors on your own.

Thanks Brian for your inputs. Totally agree with your suggestion. I think the key is "Can your RE income producing assets consistently beat the returns from the mutual funds/stocks that you are invested in?"

@Brian Eastman- Could you please refer to any RE agent who specializes in this area? It sounds like you know quite a few. I'd love to chat with a couple and learn about their experiences in this niche. Thanks.

I wanted to callout two commonly stated points:

  1. Lot of people think that investing in RE is riskier than in Mutual funds/stocks when using SDIRA/401K. The truth is that the risk is the same because the same rules apply and it doesn't matter what type of investment lie inside your retirement account.
  2. Using Cash vs retirement funds to invest in RE. They are both just "sources of funds." with unique benefits. E.g. With cash you get flexibility and fewer restrictions if you want to be actively involved in the investment. With Retirement accounts- you get tax benefits and a chance to outgrow MF/stocks. Know which tool to use for which task. 

@Jay Pillalamarri

I am not in a position to provide private client data on an internet forum. 

Flipping in an IRA or Solo 401(k) does not eliminate taxation, unfortunately. Flipping is a business, and when a tax-exempt entity like a retirement plan is acting like a business and therefore competing with tax-paying businesses, there is a tax known as UBIT that applies. Top federal rates can be 39.6%. Hard money lending to flippers or what we call a hybrid flip - buy/fix/rent... then sell at least a year down the road - are better alternatives.

@Rod Hanks First of all, I'm not an expert on this topic. I just think those who are thinking about doing this should study the cons also, as if you just talk to a custodian, he may just talk about the benefits. Buying a house can get complicated. Doing so within IRA can get even more complicated, especially if you leverage it. You can't manage yourself. You can't take out the cash. If you run out of cash, you better have a plan to put more money into the account. Tax benefits will change. Etc.

@Soh Tanaka

@Rod Hanks

I agree it is a good idea to have a good understanding of these retirement account and their rules, including the cons. You can take cash out, but you will lose the tax benefit of the account (and have to pay taxes if you already received a deduction). Also, there is no prohibition against managing properties in your IRA or 401k. Anything administrative in nature is ok. You cannot perform active labor on properties, though.

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