Use ESOP payout for real estate investing?

Question

The company I currently work for is an ESOP company and was recently purchased by another company. I will be receiving a payout of approximately $460K, 80% of which I will receive this next quarter and the remaining 20% within the next 24 months. My end goal is to eventually be able to quit my day job and invest full-time in real estate. I've been informed that to avoid any tax penalty at the time of payout is to rollover the funds to a retirement account. My question is, is there any way for me to use these funds to invest in real estate while at the same time avoiding any tax penalties? I've been reading about self-directed IRAs but from what I understand, any profits would have to go back to the self-directed IRA to eventually benefit from at retirement time. I'm only 35 so I have a ways to go to be able to enjoy the profits of using a self-directed IRA if I am understanding this tactic correctly. I would appreciate any input and ideas of what I can do with my ESOP while at the same time being able to benefit from any real estate investments within the next few years rather than only at retirement.

P.S. - I am a rookie on real-estate investing since I just started learning about it just this year but I am very eager to learn.

Carl Fischer · Answer

@Pablo Kelleher

PM me your email and I will see if some of our clients won’t mind reaching out to you.

Taylor L. · Answer

Congratulations on your windfall! If you put the money into a retirement account, you can't directly receive any benefit from it. So if you put it in a SDIRA, the SDIRA is the investor. There are a lot more rules to real estate investing with a SDIRA, but that's one of the basics.

What does "eventually" mean to you in terms of quitting your day job? What's that timeframe? It's important to get that number quantified so you have a target to work toward.

I'm not a financial advisor and I don't play one on the internet. Just a dude who invests in real estate. You should talk to a CPA who specializes in real estate or these ESOP sales. They probably have detailed strategies you can consider. I think you're doing the right thing by asking questions. Once folks hear you're getting a windfall, there will be advisors galore that come out of the woodwork. Best to get second and third opinions on any advice they give you.

Carl Fischer · Answer

@Pablo Kelleher

Talk to people who were in your position and ask them how they succeeded in their goals. It can be done with a SDIRA but you need a strategy and a plan.

Taylor L. · Answer

Next step is to work backward from 4-5 years from now! If you google "Freedom Number" that'll bring you to a bunch of helpful resources to work backward from your 4-5 year goal. It's doable but it's going to take a lot of work.

Pablo Kelleher · Answer

@Carl Fischer I’ll send you a message shortly. Thanks

Pablo Kelleher · Answer

Thanks @Carl Fischer. I will keep my eyes open for someone that has done this with an SDIRA. Anyone you recommend I reach out to?

Pablo Kelleher · Answer

@Taylor L. Thanks Taylor. I will check with some local CPAs around here and see what I find out. As far as “eventually “, I would like to be able replace my income with real estate income and quit my day job in hopefully 4-5 years. Thanks again for the advice.

Use ESOP payout for real estate investing?

Use ESOP payout for real estate investing?

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