Using 401K to invest in RE

[Christopher Romeo]

Does anyone have any insight on the transfer of a 401K from a previous job to use as a down payment on a RE investment? Is it possible to transfer it to a Self Directed IRA and use that on a possible House Hack or Flip without penalty? New York/New Jersey area. Thank you in advance!

[Bernard Reisz]

@Christopher Romeo You've got multiple options, but "house hack" with a Self-Directed IRA-owned asset is probably not going to be one of them.

Flip is definitely doable, so long as all the rules are followed (https://www.biggerpockets.com/member-blogs/9734-the-self-directed-investor).

In the current environment, you would also want to explore options created under the CARES Act that provide greater flexibility.

There are likely going to be multiple routes to consider for using funds that are currently in tax-sheltered retirement account either (a) to invest in real estate in your own name outside of the retirement account - by pulling the money out through distribution or plan loan or (b) to invest in real estate in the name of the retirement account within the retirement account, each with different tax attributes:

• Taxable Distribution w/ 10% penalty
• Taxable Distribution w/o 10% penalty
• Coronavirus-related distribution (no 10% penalty and tax-management flexibility)
• Non-taxable plan loan to invest in your own name
• Invest within a retirement account (e.g., IRA/401k/QRP) w/ no personal income tax liability

@Yonah Weiss ALWAYS a HUGE honor to be mentioned by you!