Rollover from ER 401k to SDIRA

3 Replies

Hey BP - I need your help! 

Bottom Line Up Front: How can I rollover my 401k into a Self-Directed IRA - and how can I use those funds to invest in my first Multi-Family?

Backstory: 

To be honest -today was the first time I've ever heard of a self-directed IRA. I currently am 100% vested in an employer based 401k. I have accumulated roughly 18k over 3 years in this 401k. I recently left the employer and started a new one for a significant raise. I WAS planning on just rolling over my 18k into the new employer 401k...until I listened to the most recent podcast.

I am a new investor and first time home buyer. I am planning on using my VA Loan eligibility to buy a 2-4 unit in my area to begin my adventure of real estate investing. Though I need 0% down - I will likely need some additional cash reserves for closing and other costs.

Additionally, I will be interested in purchasing another property as quickly as possible to continue my growth as a real estate investor.  This capital from my 401k could be extremely useful if I could use it without penalties and tax liability.  Help! 

Nicholas,

First, you need to educate yourself on what self-directed IRA is and how it works. This topic is frequently discussed here on the forum so just doing quick search for a related keywords might be a good way to start, the results will keep you busy reading for hours...

Then you need to set on up and rollover your 401k into it. Then you will be able to make investments in real estate and other alternative assets. 

@Nicholas Hunt welcome to the world of investing.

@Dmitriy Fomichenko  mentioned a great start by searching the forum for SDIRA and getting educated but he's being modest as his posts have helped me to understand a SDIRA.

Previously I had a 401k that I rolled into a tax-deferred IRA after leaving that employer, nothing too exciting but then I found out about the SDIRA years later and moved my money to that account and have been using it for purchasing Mortgage Notes verses property.

You're in the right forum and I'm sure there other podcasts that speak of the differences.

Good luck....

@Nicholas Hunt

You can certainly transfer the former employer 401k to a self-directed IRA and then invest the IRA in real estate. A popular IRA custodian that offers self-directed IRAs is IRA Services Trust Company-they have been in business in 1978 so have a proven record.

As the custodian of the IRA, they will assist you in transferring the 401k to the IRA so taxes do not apply.

Once the funds are in the IRA, you can work with them on forms required for the real estate investment.

Title to the property will be taken in the name of the IRA custodian for the benefit of your IRA, and the IRA custodian will safe-keep the investment documents including the recorded deed. Another option, if you want to limit the IRA custodians involvement is to invest the IRA in an LLC (this is know as an IRA LLC or checkbook IRA in the industry). However, if you only plan to invest in one property then it may not be worth the cost and ongoing filing requirements.

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