Real Estate Agent · Las Vegas, NV · Member since 2015 · 12 posts · 3 votes
Hey all,
I know this subject has plenty of posts in here but some of it wasn't clear to me and everyone's situation is unique.
I have a 401K with my current employer with approx. 58K in it and another 20K in an outstanding loan. What would be my best and hopefully easiest option for gaining access to this money to use to rehab/flip houses? Cashing out and getting nailed with the taxes and penalties is definitely not an option that's on the table.
I found the list on here with all the companies that handle the self directed IRAs and plan on calling and seeing what they can do for me, if anything. In the meantime Id like to pick the brains of you guys on here about possible options of mine.
If this is your current employer 401k, you likely have very few options. It would be unusual for you to be able to move that 401k to another IRA of your own choosing unless you change jobs or reach age 59 1/2. Even if your employer does allow for an in-service rollover to another plan, you would need to retain $20K collateral for the loan in the plan, so you would only be able to move $38K.
If this is your current employer 401k, you likely have very few options. It would be unusual for you to be able to move that 401k to another IRA of your own choosing unless you change jobs or reach age 59 1/2. Even if your employer does allow for an in-service rollover to another plan, you would need to retain $20K collateral for the loan in the plan, so you would only be able to move $38K.
Real Estate Agent · Las Vegas, NV · Member since 2015 · 12 posts · 3 votes
11y
Thanks for the fast input guys.
Even if I were able to transfer the money out of the 401K and into what, an self directed IRA? Would that be wise if I were considering flipping 3 or 4 houses a year with it? Could I even do that?
You may want to double check and see if you can even do that. My understanding is you can't use your money for "FLIPPING" houses for yourself. You may want to talk to a company who does SDIRA and see what they say about it. Good Luck!
I'm not in the position financially to buy another property so what I did was borrowed against myself 401k at a low APR, and will be withdrawing that money for a future deposit on a property. Sounds like you are needing for immediate use.. Good luck, post your decision.
Flipping is considered an active business. If you run an active business out of your IRA - all gains, income and profits from this activity would be subject to UBIT tax (Unrelated Business Income Tax), which tops at 39%. So be sure to speak with qualified tax expert and understand the impact of it before deciding to move forward.
Rental Property Investor · Cincinnati, OH · Member since 2015 · 52 posts · 19 votes
11y
Hi Kenneth,
I'm undercontract on a duplex that is going to be a buy & hold for me. The house needs extensive work I mean extensive. I decided to investigate my 401k lending options and found that there are ways to "borrow" from yourself. My 401k is with Prudential and you are able to borrow with out penalty from it. I'm being charged 8% but the great part is that 8% is going back to my 401k so essencially I'm my own bank.
If you have any questions please feel free to reach out. I hope this helps Kenneth.
Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
11y
@Kenneth LeBeau
The ROBS 401k will allow you to flip real estate as a business. ROBS stands for rollover as business start up. A ROBS 401k is not subject to UBIT. To learn more about the ROBS 401k visit the following IRS link: