Is buying a home inside of a TSP (thrift savings plan) possible?
Buford, GA · Member since 2017 · 50 posts · 13 votes
As far as I know it is not possible to buy real estate within the TSP. You also are very limited in the investments you can make, which are solely the funds that they offer (C, G, F, I, S, and lifecycle). However, I have used TSP loans on three occasions to purchase real estate. Twice using a general purpose loan and once a residential loan. You will not own these properties within your TSP, but it can give you the seed money for a down payment.
Keep in mind that a general purpose loan must be repaid in a maximum of 5 years, so if you borrow the maximum $50,000, you will be paying quite a bit per month on that loan. The good news is that you are simply repaying yourself. In my situation since I am repaying over $400 every 2 weeks on my TSP loan, I dropped my bi-weekly contribution down to 5% (the minimum if you want 100% of the employer match). When the loan is paid off I will resume maxing out my contributions ($19,000 per year for 2019).
Now the awesome thing is using the TSP residential loan. I have used this one time. Let me tell you how it worked. I bought a 4 unit property in Tucson, AZ for $152,000 using an FHA loan and 3.5% down payment. I was going to live in one unit and rent the other three out, otherwise known as house hacking. A few months prior I had bought my first investment property, another 4-plex, and I used most of my money on that deal, so I used the TSP residential loan for the down payment on this deal.
The down payment was $5320, I wrapped some of the closing costs into the loan, so I only had to come up with $6000. I used the TSP residential loan, which allowed me to repay that loan over 15 years at around 2% interest. This made the loan payments very low. I lived there for a year and then moved out and rented the unit where I used to live. I basically bought that property with no money out of pocket. Oh and it cash flowed very well. I lived for free while there, plus I still made a few hundred every month.
As far as I know it is not possible to buy real estate within the TSP. You also are very limited in the investments you can make, which are solely the funds that they offer (C, G, F, I, S, and lifecycle). However, I have used TSP loans on three occasions to purchase real estate. Twice using a general purpose loan and once a residential loan. You will not own these properties within your TSP, but it can give you the seed money for a down payment.
Keep in mind that a general purpose loan must be repaid in a maximum of 5 years, so if you borrow the maximum $50,000, you will be paying quite a bit per month on that loan. The good news is that you are simply repaying yourself. In my situation since I am repaying over $400 every 2 weeks on my TSP loan, I dropped my bi-weekly contribution down to 5% (the minimum if you want 100% of the employer match). When the loan is paid off I will resume maxing out my contributions ($19,000 per year for 2019).
Now the awesome thing is using the TSP residential loan. I have used this one time. Let me tell you how it worked. I bought a 4 unit property in Tucson, AZ for $152,000 using an FHA loan and 3.5% down payment. I was going to live in one unit and rent the other three out, otherwise known as house hacking. A few months prior I had bought my first investment property, another 4-plex, and I used most of my money on that deal, so I used the TSP residential loan for the down payment on this deal.
The down payment was $5320, I wrapped some of the closing costs into the loan, so I only had to come up with $6000. I used the TSP residential loan, which allowed me to repay that loan over 15 years at around 2% interest. This made the loan payments very low. I lived there for a year and then moved out and rented the unit where I used to live. I basically bought that property with no money out of pocket. Oh and it cash flowed very well. I lived for free while there, plus I still made a few hundred every month.
@Darius Tracy Short answer: No, you can't buy property with a TSP.
You can only buy homes inside of a Self Directed retirement account, which TSP is not.
Also buying property inside of retirement account eliminates any tax savings (depreciation mainly, but others) you normally benefit from. That is why, in addition to a few others, not a lot of people hold property in their retirement accounts, but rather they buy mortgages.
Plan Administrator of the TSP has list of investment options available for that plan, and it is always confined to the stock market, they would not allow alternative investment options such as real estate. It can be however rolled over into self-directed IRA and then can be invested in real estate, trust deeds, etc.
@Anthony Gayden gave a great summary of the TSP loan but I wanted to just echo and reinforce his statements. I too used my TSP loan to fund a down payment for a rental property and it was a very easy and low cost process. You simply have to fill out a form, pay a 50$ one time charge and the money will be in your account within a few days. You are also able to set the terms of the payback and the money is automatically taken out of your paycheck. If I was staying in the military longer, I would definitely make use of this loan as many times as possible.
Typically the ability to roll your TSP into a self directed IRA would only be after she stopped working as a civil servant.
As far as I know it is not possible to buy real estate within the TSP. You also are very limited in the investments you can make, which are solely the funds that they offer (C, G, F, I, S, and lifecycle). However, I have used TSP loans on three occasions to purchase real estate. Twice using a general purpose loan and once a residential loan. You will not own these properties within your TSP, but it can give you the seed money for a down payment.
Keep in mind that a general purpose loan must be repaid in a maximum of 5 years, so if you borrow the maximum $50,000, you will be paying quite a bit per month on that loan. The good news is that you are simply repaying yourself. In my situation since I am repaying over $400 every 2 weeks on my TSP loan, I dropped my bi-weekly contribution down to 5% (the minimum if you want 100% of the employer match). When the loan is paid off I will resume maxing out my contributions ($19,000 per year for 2019).
Now the awesome thing is using the TSP residential loan. I have used this one time. Let me tell you how it worked. I bought a 4 unit property in Tucson, AZ for $152,000 using an FHA loan and 3.5% down payment. I was going to live in one unit and rent the other three out, otherwise known as house hacking. A few months prior I had bought my first investment property, another 4-plex, and I used most of my money on that deal, so I used the TSP residential loan for the down payment on this deal.
The down payment was $5320, I wrapped some of the closing costs into the loan, so I only had to come up with $6000. I used the TSP residential loan, which allowed me to repay that loan over 15 years at around 2% interest. This made the loan payments very low. I lived there for a year and then moved out and rented the unit where I used to live. I basically bought that property with no money out of pocket. Oh and it cash flowed very well. I lived for free while there, plus I still made a few hundred every month.
This was probably the best example of how to maximize your TSP while on active duty or in the civil service. Now I'm wishing I had done this while I was in.