Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Buying & Selling Real Estate
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 7 years ago,

User Stats

8
Posts
3
Votes
Josef Super
  • Investor
  • Pittsburgh, PA
3
Votes |
8
Posts

Rollover 401K to a Self-Directed IRA for property purchase

Josef Super
  • Investor
  • Pittsburgh, PA
Posted

Hello BP community! I have recently switched jobs and have accumulated $88K in my 401K. I am looking to invest these funds in real estate instead of keeping it in mutual funds, bonds, etc. My plan is to roll it over into a Self-Directed IRA with a checkbook capabilities. SDIRA would then allow me to purchase an investment property, which I would be able to rent out. Implications with purchasing a rental property within SDIRA is that I will need to follow IRS imposed SDIRA rules such as no self-dealing, running an active business, and not providing a service to the property. As a workaround, my plan is to have my friend manage my property for me and compensate him based on the amount of work he needs to do on the property. Another potential challenge is the difficulty of obtaining a non-recourse loan that would require me to put down ~40% on the property at a potentially high interest rate. A workaround I am exploring is to create an SDIRA LLC and partner up with my friend who also has funds in a 401K from previous employer. This way my partner and I would be able to combine our funds and buy a property without a need for a non-recourse loan also allowing us to avoid paying Unrelated Business Income Tax (UBIT).

Here are some of the questions I have:

  • Suggestions for a reliable custodian to insure I don’t violate any of the IRS transaction rules and also charges low fees.
  • Does the custodian setup a SDIRA LLC or will I need to have a lawyer set this up?
  • Advantages and disadvantages of purchasing notes instead of property within a Self-Directed IRA.
  • Overall comments or deficiencies in the plan I have outlined above?

My overall goal with setting up a SDIRA is to identify and utilize a best option for the highest returns for my retirement account. I am currently 30 years old.

Thanks in advance,

-Joe  

Loading replies...