Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes
Recently I had questions about moving or withdraw funds from former employer 401K account to invest in RE. I've learned it takes a lot of impact with taxes and penalties and better off to move funds to Self-directed IRA.
Someone suggested to move the 401K funds to self-direct IRA and invest in RE and mortgage notes, since the move will not take taxes or penalties implications. I'm not sure how this works.
Any help from experienced investors with this type of transactions?
You are correct in not investing in something you don’t understand. When your ready to learn more, checkout SDIRA websites and attend some classes. In addition, The mid Atlantic summit scheduled in October in Philadelphia will have a lot of the BP heavy hitters (@Dave Van Horn@Brian Adams@Matt Faircloth @joe fairless @j. Martin @paul Moore and many more) attending and your knowledge and network will be expanded greatly. This is a non selling educational event.
Your understanding is correct: when you take money from your 401k before normal retirement age - you would have to pay taxes and penalties on the amount withdrawn, in most cases this is not a wise financial move.
Alternatively you can move these funds into Self-Directed IRA, without any tax implications. Then you have the freedom to invest into virtually any asset: real estate, mortgage notes, precious metals, multi-family syndication, note funds, private lending, etc. etc.
Investing in notes is my favorite for retirement accounts for several reasons: passive investing, low risk (if you do your due diligence), good returns.
This topic has been discussed here on the forum many times, I suggest you search the forum for the related discussions and you can learn a lot.
Your understanding is correct: when you take money from your 401k before normal retirement age - you would have to pay taxes and penalties on the amount withdrawn, in most cases this is not a wise financial move.
Alternatively you can move these funds into Self-Directed IRA, without any tax implications. Then you have the freedom to invest into virtually any asset: real estate, mortgage notes, precious metals, multi-family syndication, note funds, private lending, etc. etc.
Investing in notes is my favorite for retirement accounts for several reasons: passive investing, low risk (if you do your due diligence), good returns.
This topic has been discussed here on the forum many times, I suggest you search the forum for the related discussions and you can learn a lot.
I have not search yet for the topic in BP but will do.
Is this something the average financial consultant could help me out (example good medium local company, not the Fidelity or Edward-Jones type)?
Also you said is low risk with due diligence. I'm new to this and while I can learn I do not have the time to spend on the short term, so I don't want to put all my assets in that investment account with something I'm not familiar. Believe there are companies that manage this type of investments. Or investing in notes is something very specific that I should look for more expert consultant?
Typical financial consultants do not have any experience nor knowledge about alternative investments. I understand that you don't have any experience with this but you would have to learn, it's your money and no one is going to care more about this than you. There are many of us here on BP who have experience and will be glad to guide you, but ultimately you have to invest your own time and be willing to learn. You are welcome to PM me so we can arrange a quick call and chat about this.
A good place to start would be to invest in a note fund. Contact @Dave Van Horn, he manages few of such funds, you don't have to do any work yourself, just invest and start receiving monthly checks. You can start with as little as $10K (I believe), but I think you must be accredited to invest (if I remember correctly). Later on you can invest in individual notes.
You are correct in not investing in something you don’t understand. When your ready to learn more, checkout SDIRA websites and attend some classes. In addition, The mid Atlantic summit scheduled in October in Philadelphia will have a lot of the BP heavy hitters (@Dave Van Horn@Brian Adams@Matt Faircloth @joe fairless @j. Martin @paul Moore and many more) attending and your knowledge and network will be expanded greatly. This is a non selling educational event.
Here are some items to considering when investing a self-directed IRA in notes.
The note cannot be to a disqualified party such as the IRA owner and most of his or her family members.
The IRA custodian is listed on the note as the lender (beneficiary) for the benefit of your IRA.
All payments flow back to the IRA and grow on a tax deferred basis.
The note can be structured as secured or unsecured. It is preferable to invest IRA funds in notes secured by real-estate in the even of default by the borrower.
October 17-19. Google “mid Atlantic Summit 2019 Philadelphia” and you will get more details. Sign up early for biggest discounts but definitely a great price for the value— and proceeds go to charity. If you have any subjects you want to have covered let myself or @Dave Van Horn know ASAP.
We just announced early bird tix to the public today! Plan to cover notes and retirement account investing (among other things) in our lineup of speakers/panelists/breakout sessions.
Here's the link to the website if you'd like more info:
Rental Property Investor · San Diego, CA · Member since 2018 · 176 posts · 83 votes
7y
@Josue Vargas I self-directed my IRA and bought a performing note. It was a great way to earn some passive income and performs a lot better than the mutual funds it has been sitting in for past 7 years. PM me if you have more specific questions. Best of Luck