Should I roll my old 401k into a self-directed IRA?

[Robert Smith]

Hey BP,

I have $100k collecting dust in a 401k from a previous job. I'm considering either rolling this money into my current 401k (boring) or doing something more "real-estate-y" with it. I understand there are ways to put this money into a self-directed IRA/401k (thanks to a blurb in Anson Young's book on Finding and Funding Great Deals). And that this money can then be invested in real estate. I like the idea of hard/private money lending with this money for a couple of reasons:

1. Returns appear to be higher than the 1.5% this fund is getting YTD
2. Could provide experience about this process as a lender
3. Could help me foster relationships with players in this space to fuel my own real-estate goals (most important)

With those 3 goals in mind, what are some of the things I could do with this money? What are some of the pitfalls and gotchas involved? And is $100k even enough money to get in to this area?

Thanks

[Carl Fischer]

@Robert Smith

You can certainly roll your old 401(k) into a self directed IRA for lending. Many investors enjoy this method of investing. There are so many different options and structures for private lending, you can find a deal for $100K.

Are you familiar with the prohibited transactions of what you can not invest in, and who you can not invest in? The biggest "pitfalls or gotchas" is failure to know or fully understand the rules set by the IRS for self directed IRA's. One piece of advice, make sure to perform sound due diligence on who/what you invest in. Self-directed IRA's give you the control to pick your own investment, make sure you fully research into their reputation and credibility before lending to them.