Can I Use My 401k to Buy a House
Today we’re going to be talking about 401k’s. Can you invest them on real estate? What are the restrictions? What are your options? Let’s get you educated.
If you had to put money in 401k or real estate, which do you think is safer? Neither? Probably the property. Pro
bably the real estate? Yeah. Alright. At least you have something tangible. Yeah. That you could trade or whatever.
401k’s like IRA’s are an excellent source for investing in real estate. And I know a four different major ways of leveraging 401k to be able to purchase real estate. The first one is called doing what’s called a self directed 401k. Okay. A self directed 401k is actually where you are going to take your 401k out of the hands of the company and you’re going to put into different account with a different steward where you get to actually direct where those funds go. So, for example one of the things you can do, is you can direct those funds into a paid off piece of property. And so, if you found the right kind of property and your 401k is enough to buy a paid off cash.
Then you would be receiving a tremendous cash flow. Another thing that you have is something that is called a non-recourse loan. So, again taking that self directed 401k, there are some banks that use none institutionalize funds where you can take some of the money and actually do a typical down payment on a property. Only certain banks will allow you to do that. The other option that you have is to actually just take your 401k out. And there’s two ways of doing that. One is with penalties, and one is without penalties. To do without penalties you’d be asking for something called an in-service distribution. So go talk to the director over your 401k to the company and ask them “can I take an in-service distribution?” And if you can that basically means that you actually have access to your 401k without having any penalties. And the fourth and final way is to see if you can actually just take the money out of your 401k and be penalized. WHAT?! Take my money out of my 401k and pay taxes and pay penalties? YEAH! That’s exactly what I am suggesting. It’s an excellent way to buy real estate. Don’t forget you will never ever, ever, ever get to avoid paying taxes. So whether it’s now or later,
with the right investment in front of you, “now” may be actually be your best option. Paying the 10% penalty, I call that a cost of business. That was your choice to put it into the 401k. And there is a cost for taking it out. Unless you want to wait like 59 and a half and for some of you that so many years away that, that 10% penalty might in fact be a really, really good decision.
If you want to know how your 401k can be invested in real estate. There are all these different little new one’s on how to do it, do I self direct my 401k. Do I just pull it out, are there any exceptions to my 401k? And honestly the best thing to do is to get consultation. We called it a game plan and it’s something we offer to people for free. They’re going to send you this document right here and this game plan document has all sorts of information about 401k’s. And the right, wrong ways of how to use them and how you can use it for real estate. And then it comes with a consultation. So that if you have questions my team can answer those and ultimately see if it’s a great fit for you to use that 401k to start buying real estate, build your cash flow up, build your net worth up and take control of your personal financial situation.