Investing with 401k. Using a partner.

[Lance Conyers]

Hello BP community,

I am an experienced house renovator with no experience in flipping houses. Let me explain. Ive been in home construction, remolding and maintenance all my life. I worked as a commercial maintenance man and rental house flipper for many years. Well its time that i start doing it for my self rather than putting money in other peoples pockets. 

I have a very small 401k I would like to invest with. I cant retire with this 401k so I'm going all in on something I know very well and that's home renovation. I plan to buy a quick flip with money down using my 401k monies. I have not yet found a lender. 

My question is is there a good way to take out my 401k to invest with. Should I borrow against it or take it all out? 

Also should I flip a house on my own or is it a good idea to have a partner onboard? If so why is a partner a good idea?

[Justin Windham]

@Lance Conyers

If you can use a 401k participant loan to accomplish what you want, that is generally considered the less aggressive approach compared to taking a taxable distribution, especially if you are not yet 59.5 or older. This gives you a chance to preserve the retirement funds (you'll pay back the loan to the 401k) and avoid taxes and penalties on a distribution.

While self-directed IRAs and Solo 401ks can be great tools to invest your retirement funds into real estate, they don't generally help you create income for yourself immediately. They help you grow your retirement funds for your future benefit. One exception is that the Solo 401k (but not the IRA) can come with a participant loan feature which you can use to jumpstart your investing.