401K Investing in Real Estate

[Ted Davis]

Hello everyone, I’ve come across a few mentions of 401k investments in real estate in articles but after googling for more info, outside of contact your plans administrator to see if your plan allows this type of investing, not many details. I was hoping to get more insight from the forums. Can anyone provide me with some facts on this topic? Thank you all in advance

[George Blower]

@Ted Davis

Do you have a 401k with your full-time employer? 

If yes, their plan most likely does not allow for investing in real estate. Generally only self-directed IRAs can be invested in real estate as well as solo 401(k) plans, which are for the self-employed. You can call your 401(k) administrator to confirm but again the answer is most likely no you cannot invest the existing 401(k) real estate but rather just the mutual funds that they offer. The employer can decide what investments can be made under the plan and most go the mutual fund route. 

On the other hand, if you are no longer working for the employer that sponsors not 401(k) plan or if you are age 59 1/2 or older than you could transfer your 401(k) funds to a self-directed IRA.

[Dmitriy Fomichenko]

Ted,

In order for you to invest in real estate using your retirement funds you need a self-direct IRA:

https://www.biggerpockets.com/blogs/2810/51528-how...

If you have a 401k from previous employer or an IRA you can rollover those funds into self-directed IRA. Current employer will likely not going to allow you to access those funds until you leave that company.

[Lane Kawaoka]

Ted Davis there are options to use your existing 401k but I would consider stop contributing to any QRPs or qualified retirement plans.

I cashed out my 401k and paid the penalties because it just was not worth it to pay the fees and be restricted with bad loan options and government regulations.

[Michael Plaks]

@Ted Davis

You can get excellent advice here on BP from experts like @Dmitriy Fomichenko and @George Blower.

You can also take advantage of our local Houston resource, Quest IRA. They offer tons of free education and regular free networking. You can mingle with people who have extensive experience doing investing with their retirement accounts.

[Eric Koelling]

I am currently still employed by my company who matches my Roth 401k. I don't plan to "withdraw" any amount from it, but I plan to "borrow" from it in order to invest in real estate. By doing this, I'm not penalized a single penny. I have between 12 and 60 months to pay back the "loan" bi weekly.

[Megan Arzt]

Instead of cashing out your 401K you can often borrow against it.  Mine is 50% of the value up to $50k max.  There is a $60- set up fee and then I pay it back over 5-10 years, paying the interest to myself.....  It's something to look into.  Not all companies offer that, but some do.  

[Ted Davis]

Thank you George, Megan, Lane, Michael, Demitiry and Eric! I’m in the learning faze but one day I will be able to return the favor.