Rental Property Investor · NJ & NY · Member since 2019 · 31 posts · 6 votes
I have a 401k plan with an employer I no longer work for in 3 years. I want to use the funds for my second deal, but I don't want to pay the early withdraw fees, etc. What are my options?
I know I can't take a loan out since I no longer work there... Any recommendations on how to strategically use these funds? Transfer to a ROTH IRA, is an option I was looking into. I would appreciate any feedback and advise.
Gonna push back on Jaron's sensible post for a bit. It is a different situation if you are investing the money, instead of consuming it to get by then its a math problem. 401Ks etc. gather tax free and thats a powerful factor, but real estate CAN outperform if well done. And current use can be more valuable than future use.And if you can legitimately use the cares act you don't have a penalty and have a 3 year window to mitigate the tax hit. You can really jumpstart stuff using funds like that.
Don't be too sure you can't get a loan from your old employers account, or move it to one where you can. I am still doing loans from a 401K from an employer I left 8 years ago--it depends on the plan. Roth's are great, you do have the tax hit on making the transfer but no penalty.
The loans are so powerful...they helped us by our starter home, and we were able to use one to buy our first investment property which doubled in value. It doesn't show up on your DTI and you pay back the money to yourself.
@Jonathan Cevallos I believe you can also convert the old 401k plan into a Solo401k, one that you control. As long as it's associated with a LLC controlled by you and your spouse. It's subject to the same favorable lending rules and a higher contribution limit than a SD IRA.
Rental Property Investor · NJ & NY · Member since 2019 · 31 posts · 6 votes
5y
@Taylor L. Thanks, what platform would you recommend for my first SDIRA Acct? Furthermore, how would I go about finding trusted borrowers? What due diligence should I proceed with?
Rental Property Investor · NJ & NY · Member since 2019 · 31 posts · 6 votes
5y
@Chris Levarek. Thanks, I definitely looked past the rolling over these funds to my current 401k. I am looking into a custodian for my first SDIRA account. Any recommendations with whom to open this account with? I have about $25k, you think this is enough to start investing in syndications? Where do I start?
I also have a 401k with my current employee, this is my first time hearing of the Cares Act. Can I message you privately to further discuss this?
Rental Property Investor · NJ & NY · Member since 2019 · 31 posts · 6 votes
5y
@Dmitriy Fomichenko
Thank you. Excuse my ignorance but I’m not sure what you mean by “non-recourse”.
Regarding the solo 401k... I don't have a business as of now. However, if I create an LLC for property management (once I have 4+ properties), can this qualify for a solo 401k?
Rental Property Investor · NJ & NY · Member since 2019 · 31 posts · 6 votes
5y
@Matthew Armstrong
Thanks for your input. Didn't think there was ALL these different routes. Here I was thinking of rolling into a ROTH IRA.
Do you think $25k is enough to proceed with setting up a "checkbook" controlled IRA? This will now require me to create an LLC... Is this the best route in using the funds for private lending? How do you and your wife find qualified, trusted borrowers? How are ya'll protected?
Would like to learn more of this strategy, can I send you a private message?
Yes feel free to reach out. Would be happy to provide and answer any questions. 25k is plenty to get started. I have been part of loans as little as 5k. The LLC is not required but adds convenience (but also cost in setup and maintenance). We use NuviewTrust as our custodian as they are located here in Central Florida. We use a loan servicing company that has a good reputation and they bring together the lenders and borrowers. The loan is protected and backed by the physical property on the loan.
Rental Property Investor · Camas, WA · Member since 2020 · 284 posts · 202 votes
5y
@Jonathan Cevallos
By contingency funds I mean cash outside of other investments. Things that can cover you when expenses come that are 100% liquid. The same way you carry some account balance for an emergency in a household budget.