How to Invest in Real Estate with Your Retirement IRA or 401K (Roll Over 401k to IRA?)

Updated : Sep 12, 2019 in Articles

How to Invest in Real Estate with Your Retirement IRA or 401K (Roll Over 401k to IRA?)


(upbeat music) – [Toby Mathis] Can I roll over my 401k to a self-directed IRA to
invest in real estate? The answer is, absolutely. However, do you really want to? Because, depending on the
401k, again there’s two types. There’s multi-employee plans, where’s it’s an employer and they have lots of employees in it
and there’s restrictions on what kinds of investments you do, and then there’s the Solo
401k that you control. And honestly, you’re
better off using that 401k for the investment in real
estate if that’s what you’re doing because you don’t need a custodian. You can sign your own closing docs. You don’t have unrelated
debt finance income issues, that way you can borrow money. Whereas, in an IRA, you
have to pay the tax on it. IRAs are also single owners, so if spouses are buying
a property in their IRAs, well there’s actually two
owners on that property or you’re setting up an LLC, which is actually my preferred method. You’re setting up an
LLC inside of the IRA, it’s called a checkbook IRA
or an LLC inside of the 401k to make sure that you don’t
have unlimited exposure due to liabilities that could
come from that real estate. So if you own real estate, in a self-directed IRA, you’re ultimately, as the individual
retirement account holder, you’re personally liable
for the activities. So if you have a rental
property on an IRA, and there’s a slip and fall,
you’re ultimately responsible. So, we always want to make sure that we’re cognizant of asset protection when we’re setting this up. But yes, you can absolutely roll it and use a self-directed IRA or you can just use a Solo 401k. Or if this is with an employer, a past employer, they
allow you to roll the plan, I mean if it’s a past employer you can absolutely roll the plan. If it’s a current employer they could say ‘no you can’t until you leave service’. But if you have an old 401k
and you want to roll it in, one of the best things you
can do is set up a business and have a sponsor 401k. You just remove the issues. Nothing against IRA custodians but they don’t work on weekends. So if you’re buying property
and you’re there on a Saturday and it’s a bidding situation, you’re not closing and
you’re not able to even bid ’cause you can’t get a signed
offer from the custodian until they get back in the office. So if you want to avoid
that, you use a Solo 401k. Alright, we have lots of questions. I don’t see any of ’em
pertaining to that one so I’m going to skip
through to the next one. You want to add anything onto- – [Jeff] No I’m good, I’m just watchin’. – [Toby] All right. Some of this stuff is more
lawyer than accountant, so, in that particular case, as long as you’re going plan to plan, you don’t have to worry. And I’ll say, I can twist words, we can play the Roth game and say oh it has to be a traditional
IRA 401k to a traditional or a Roth 401k would have
to go through a Roth IRA. You cannot go back from a
Roth IRA into a Roth 401k. A lot of people don’t know that. So we can twist it. – [Jeff] Right. – But we don’t.
– No. – [Toby] We’re not going to do that. Even though we just- (upbeat music)

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