401k to IRA for investment property

[Gaston Barua]

Hello BP!

I am highly excited because after going to my first REI meet up I learned about a new creative way to fund a down payment for my first investment property thanks to a fellow investor who does this for a living. He helps fellow investors leverage their 401k and transfer a portion of the funds into an IRA for investment purposes. I am currently looking into details about doing this through my company.

My questions are:  

has any one used this method to fund a deal? Whats the process like? What should I be cautious of? What was the biggest obstacle?

Thanks in advance. Happy investing! 

[Brian Eastman]

@Gaston Barua

One can invest IRA or 401k monies into real estate. Keep in mind, however, this is not you investing in real estate and getting to use IRA funds to do so. Rather, the IRA is investing in real estate instead of investing in, say, stocks. You can direct the investments yourself, but you cannot personally benefit in any way other than growing your retirement savings.

In my many years of experience in this field, I have found that some of the least reliable information on the topic comes from real estate gurus. They focus on getting you excited and opening up your financial resources to put into deals where they or their partners can earn a commission. We have to do a lot of "un-learning" with clients when they first learn about self directed IRA plans from a guru course.

That said, this can be a very positive way to diversify your retirement savings into an asset class that you know and understand.

There are several resources here on BP very knowledgeable in this topic.  Call around and ask questions and that will help you to determine if this is something that will benefit you.

I would add that one can typically not access a current employer 401k plan in order to move those funds to a self-directed plan. Funds from a prior employer plan or in an IRA could be moved.