Skip to content
Tax, SDIRAs & Cost Segregation

User Stats

4
Posts
0
Votes
Shannon Carter
  • Baton Rouge, la
0
Votes |
4
Posts

401k withdrawal to invest

Shannon Carter
  • Baton Rouge, la
Posted Feb 1 2024, 03:19

Hello Bp,

I would like some feedback on this creative financing I am trying to do.

I have done 2 successful flips and also have one 1 buy and hold.

Now that I have a little skin in the game I’d like to ask my dad who is 62, with a 6 figure 401k to allow me to use $50,000 to invest in more real estate. I’d like to pay him as if he’s my private money lender after each deal.

He’s funded my deals by taking out a loan from his 401k and I would make the biweekly loan payments , and pay him a fee once I sold my flips and refinanced my last property. That way we both made profit.

But we can’t do another 401k loan for another 6 months .

My question is , what steps would I need to take if he does the 50k withdrawal instead of the loan? Since he's 62 I know we can withdraw with no penalty, but is there a way to avoid taxes ? Like transferring the funds to a SDIRA or Roth IRA ?

Thanks for the feedback

Also, I'd like to maybe do 2 deals at a time this year if the opportunity presents itself, should I start building relationships with HML's ? Or am I on the right track by avoiding fees and points and keep partnering with my dad. Thanks

User Stats

854
Posts
395
Votes
Zachary Jensen
Tax & Financial Services
#4 Tax, SDIRAs & Cost Segregation Contributor
  • Accountant
  • San Diego, CA
395
Votes |
854
Posts
Zachary Jensen
Tax & Financial Services
#4 Tax, SDIRAs & Cost Segregation Contributor
  • Accountant
  • San Diego, CA
Replied Feb 1 2024, 06:49

I would suggest looking into a roth IRA rollover, however that in of itself is a taxable event depending on your mix of pre tax and post tax dollars going over to the roth IRA. It also depends on how much is in there. Does it make sense to pay tax now, invest the money inside of a roth IRA account and have it keep growing over the next 10 years? would need to know more. Hope that helps!

User Stats

51
Posts
25
Votes
Replied Feb 12 2024, 10:09

Might also be able to roll into a self-directed non-Roth IRA, I think must not still be working for that employer. If that's a possibility, maybe no immediate tax and able to loan to you. But taxes someday when money is withdrawn. Not strictly my field, do your own research.

BiggerPockets logo
BiggerPockets
|
Sponsored
Find an investor-friendly agent in your market TODAY Get matched with our network of trusted, local, investor friendly agents in under 2 minutes