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Are you searching for more information on how to buy real estate with 401k? If so, you’ve come to the right place!

With weak GDP, and news of no economic stimulus on the horizon, the stock marketing has been in the red recently and investors want to protect their money by investing it in real estate.

In this article, I will provide you with several tips that you can use to successfully get started with buying real estate with your 401k.

Can You Use Your Employer-Sponsored Retirement Plan To Buy Real Estate With 401K?

Since you’re reading this article, it’s highly likely that you have an employer-sponsored 401K since most people who work for corporations do have some type of retirement account.

Sadly, even though you may have had your 401k for a long time, the reality is that you cannot invest in real estate with your 401K because most employers 401K accounts do not allow this.

The good news is that you can buy real estate with your retirement account if you convert your 401k into a Self-Directed IRA.


Learn More About Self-Directed IRA

What is a Self-Directed IRA? It’s a retirement account that gives you the ability to direct how you want your funds invested.

With this account, you can invest in real estate of any type but, there are certain restrictions for things that you cannot invest in with a Self-Directed IRA. For example: you cannot invest in artwork, antiques, coins, or collectibles.

The good news is that there are a wide variety of self-directed IRAs available that you can choose from. For example, you can roll your 401k into a Roth IRA.

Yes, a self-directed IRA is an excellent way to invest in real estate, especially since it offers you a wide variety of benefits, including tax advantages, which will help you keep more of the rental income from your properties and shelter you from having to pay capital gains on the property that you own.

Getting A Mortgage Loan To Buy Real Estate With A Self-Directed IRA

Keep in mind though that even though you want to Buy Real Estate With 401K, keep it may be difficult for you to obtain a mortgage loan.

Some banks may not be inclined to lend to you while other banks may make a mortgage loan to you that is guaranteed by your assets.

This type of loan is also known as a recourse loan, it means that if you end up foreclosing on the property that you purchase, the bank may end up going after the assets that you own.

What Are The Rules That You Need To Know?

Even though you may be eager to buy real estate with your Self-Directed IRA, the reality is that there are rules that apply which you must follow, especially if you want to avoid the Wrath of the IRS.

Rule #1 – Any Real estate that you purchase with your Self-Directed IRA must be for investment purposes only. This means that you cannot utilize one of the properties that you buy as a vacation home.

Rule #2 – If your property has any expenses, they must be paid by the IRA, and not by you. This means that if you buy Real Estate with 401K, and find out that you have to put a new roof on your rental property, the check has to come from the IRA so you have to make sure that you always have funds available in your account to cover those expenses when they arise.

Rule #3 – In keeping with the business versus personal theme, another rule that you have to follow is that you cannot use any personal possessions in the property that you purchased with your IRA. This means that you can’t use any personal furniture that you already own in your property.

Rule #4 – Remember, when using an IRA to purchase real estate, you have to keep the focus on utilizing that property for business purposes only. This also means that you cannot allow any of your family members or relatives to use the IRA because you could ultimately violate IRS rules and be liable for having to pay taxes on that property.

Rule #5 – Once your property starts generating rental income, it needs to be paid directly to the IRA and not to you.

What Type Of Property Should You Buy?

Now that I’ve provided you with the fundamentals, and the rules that you need to know about using an IRA to purchase real estate, the next thing that used to think about is what type of property you’re going to buy with the money in your self-directed individual retirement account.

The good news is that there are a wide variety of real estate opportunities that you can invest in. You may want to consider investing in commercial properties, fix and flip homes, land lots, mobile home parks, self-storage facilities, or rental properties.

Your goal when buying real estate using your self-directed IRA should be to purchase a property that’s going to generate rental income for you. This is important because, since you want to buy Real Estate With 401K, you have to know that with rental income, you can also utilize those funds to pay off the mortgage for the property so that it pays for itself.

Over the years, even though there have been a wide variety of opportunities for Real Estate Investors to become involved with, I have found that multifamily properties have been one of the most profitable and productive real estate Investments.

In my opinion, multifamily properties are better than other real estate Investments because, renters are always going to need a place to live and, the United States has developed into a nation of renters.

When you combine both of these facts, it stands to reason that any investor who holds multifamily properties in their portfolio is going to have -an asset that’s always in demand and providing them with stable cash flow

Contact Trier Capital

At Trier Capital, we do all the hard work to find and acquire ideal properties, and then oversee asset management after purchase, while our investors sit back, relax, and receive tax-advantaged passive cash flow.

To learn more about our process for investing in profitable multifamily properties across the United States, and the benefits of partnering with us, contact me today by calling (630) 229-2383 or click here.


Erik Hatch

Erik is currently invested in projects in Florida, Texas and Kentucky totaling $79 Million. He is an accomplished leader who motivates and inspires action while at the same time, is grounded in business metrics and information that drives successful businesses.