New to Real Estate · Memphis · Member since 2019 · 2 posts · 0 votes
I have idle 401k that could be rolled into a real estate IRA and then use that rental cash flow to build equity for following purchases. Anyone been down this path?
Self Directed IRA & 401k Advisor · Wenatchee, WA · Member since 2014 · 2k+ posts · 2k+ votes
6y
@Eric Weber Thousands of folks have done what you propose.
Be advised that a self-directed IRA is simply a means to diversify your retirement portfolio. If you can produce better returns for your tax-sheltered savings in real estate than in the investments it is in currently, great. This type of tool is not a means for "you to invest in real estate" or benefit in any way personally at the current time.
There is a lot of great content here on BiggerPockets and I am sure you will hear from investors who have done as you are considering.
New to Real Estate · Memphis · Member since 2019 · 2 posts · 0 votes
6y
Can the cash flow from a buy and rent IRA be used to buy more properties and expand the IRA portfolio? Can equity be drawn upon to finance future deals? Start by buying property 1 with 401k conversion to IRA and then take a loan against that property for the purpose of reinvesting in another property?
Investor · Cincinnati, OH · Member since 2015 · 242 posts · 182 votes
6y
@Eric Weber. What you describe is more commonly called a self directed IRA. Search for that term on BP and you'll find tons of info. I believe you can buy additional properties after the initial one if you follow the rules. Don't go it alone, you need to seek the services of a professional to do this.
Yes, in general terms a self-directed IRA may be used as you describe. Mortgage debt must be non-recourse, meaning no personal guarantee from you. A handful of banks offer such loans for IRA and 401(k) based retirement plans. LTV's will be lower than what one would expect with a personally guaranteed loan.