Using Retirement Accounts for REI

[Patrick Bunn]

I just read The Book on Tax Strategies for the Savvy Real Estate Investor. It is a great book. And based on something I read in there I asked myself “how can I use my 401k to invest in real estate?”

Setup:

Toward the end of last year, I changed jobs. I had a 401k with my previous employer. I’m not eligible for 401k through my current employer until January 2021. Although the plan I had with my previous employer allowed me to take out loans and pay myself back with interest, that’s not accessible to me because I’m no longer an employee. Unfortunately, the 401k with my current employer does not offer the ability to take out loans.

Objective:

1) I’d like to have the ability to borrow money again this 401k for something like a down payment on my first property. I’d rather pay myself the interest than the bank.

2) I’d also like to be able to choose how to invest the money in my retirement account into something like notes or REITs.

I’m thinking for #1 I’d need a solo 401k. Is that correct?

And I'm thinking for #2 I'd need a self-directing IRA. Is that correct?

If I were to roll over my 401k, I have to do all of it, so I'm trying to determine the how. Like initially roll it over into an IRA, then split it into a solo 401k and a self-directing IRA. Does that sound like a sound strategy?

I know a lot of people advise not borrowing money from a retirement account, but from how I see it, I'd basically be investing money I already have into something with a higher ROI than I'd get in stocks, while paying myself back with interest, which is its own ROI.