Is buying a home inside of a TSP (thrift savings plan) possible?

[Darius Tracy]

I have been talking with my mother who has been working civil service for the government for over 20 years. On one of the podcasts I remember hearing how u could buy properties in a self directed IRA and was wondering if anyone had any experience doing so in a TSP (thrift savings plan) as this is her savings vehicle for her employment. Any advice is greatly appreciated. Thank you

[Anthony Gayden]

Originally posted by @Darius Tracy:

I have been talking with my mother who has been working civil service for the government for over 20 years. On one of the podcasts I remember hearing how u could buy properties in a self directed IRA and was wondering if anyone had any experience doing so in a TSP (thrift savings plan) as this is her savings vehicle for her employment. Any advice is greatly appreciated. Thank you

As far as I know it is not possible to buy real estate within the TSP. You also are very limited in the investments you can make, which are solely the funds that they offer (C, G, F, I, S, and lifecycle). However, I have used TSP loans on three occasions to purchase real estate. Twice using a general purpose loan and once a residential loan. You will not own these properties within your TSP, but it can give you the seed money for a down payment.

Keep in mind that a general purpose loan must be repaid in a maximum of 5 years, so if you borrow the maximum $50,000, you will be paying quite a bit per month on that loan. The good news is that you are simply repaying yourself. In my situation since I am repaying over $400 every 2 weeks on my TSP loan, I dropped my bi-weekly contribution down to 5% (the minimum if you want 100% of the employer match). When the loan is paid off I will resume maxing out my contributions ($19,000 per year for 2019).

Now the awesome thing is using the TSP residential loan. I have used this one time. Let me tell you how it worked. I bought a 4 unit property in Tucson, AZ for $152,000 using an FHA loan and 3.5% down payment. I was going to live in one unit and rent the other three out, otherwise known as house hacking. A few months prior I had bought my first investment property, another 4-plex, and I used most of my money on that deal, so I used the TSP residential loan for the down payment on this deal.

The down payment was $5320, I wrapped some of the closing costs into the loan, so I only had to come up with $6000. I used the TSP residential loan, which allowed me to repay that loan over 15 years at around 2% interest. This made the loan payments very low. I lived there for a year and then moved out and rented the unit where I used to live. I basically bought that property with no money out of pocket. Oh and it cash flowed very well. I lived for free while there, plus I still made a few hundred every month.