Funding rehab with 401k

[Corey Frank]

Hello biggetpockets community! After months of studying and looking I think I have found the one. My first rehab. The numbers make sense and the renovations are simple enough not to be overwhelming. However, to fund the rehab myself (which I would rather do) I will have to match the amount of cash I have saved with funds from my 401k. Is there anyway I can fund this rehab by rolling my 401k into an ira or something the like so that I do not have to take the giant tax hit by cashing the 401k out? I have heard of investors doing this with buy and hold properties however my plans with this are a simple fix and flip. Any input will be greatly appreciated!

[Brian Eastman]

@Corey Frank

If your 401k is with your current employer, you may be able to borrow the lesser of $50K or 50% of the account value.  That is not the plan investing in the real estate deal, but rather you taking a loan from your plan that you need to pay back.

If the 401k is from a former employer, it could be rolled over to a self-directed IRA or 401k. In that case, however, you could not combine personal funds and IRA funds. The IRA would need to operate 100% separately from you and your money. A self-directed IRA is not a means for you to access tax-sheltered retirement savings tax free for your purposes. Rather, such a plan is a means to diversify your retirement savings away from conventional publicly traded assets and into things such as real estate, with the idea that you may be able to generate better return on investment for the plan.

There are many discussions here on BP on this topic.  Read up!