Where to park my self directed 401K / IRA Money

Question

Greetings BP,

I am a new investor and I was curious to know of some companies or investors who are actively seeking investors. I have a self directed 401k with a fair amount of cash in it ~50K and I was interested in seeing what investors and or companies I could work with to beat the laughable returns I am getting in the stock market right now. If its not too much trouble could some of you seasoned pros assist me in finding some outlets for that by either referring me to someone or telling me how to find such outlets? Thanks again BP

Mark Robertson · Answer

@Ian Ippolito It must be Holdfolio that @Larry Fried calls the Holy Grail, (it may be the Holy Grail since no other platform has taken non accredited money using 506b) They are the only real estate crowdfunding platform that takes non accredited investors and puts together 10 SFH portfolios. It will be interesting to see if the principles post again after BP members called into question the legality of how they operate.

Raj Vachani · Answer

Chris, as you probably know that with a self directed 401k you don't need a custodian. You have full check writing authority as a trustee. In the case of a Self Directed IRA you do need to have a custodian.

I agree with some of the previous posts that investing in either real estate debt or equity is the easiest way to invest your money. In the case of real estate debt the risk is a lot lower as long as you look for investments where the LTV is conservative (60% ish). The beauty here is when you do it through your 401k that you can earn between 8% to 11% through these crowd funding sites and not pay a dime in taxes until you withdraw your chase when you retire. Hence the cash grows compounded with nearly no fees.

The crowdfunding sites where you purchase equity are out there too. However the risk is higher.

Check out the following (peerstreet, realtymogul, patchofland, realtyshares... there are MANY others).

Dmitriy Fomichenko · Answer

@Chris Armstrong

I (as well as many other BP members) mainly invest in private lending. The reason this is attractive to me is because it is passive and you get double digit returns on your money. It is also low risk because typically my loans are secured by the property at about 60% LTV.

You will need to build some relationships in order to access such opportunities but if you would like some pointers send me PM.

Patricia Joseph · Answer

Thanks @Brian Eastman that's good info to know!

Brian Eastman · Answer

@Patricia Joseph

That is exactly what I am saying.

A 401k may only be funded via new tax-year contributions from income received via the employer sponsoring the plan, or via rollover from another plan.

When you take a loan from a current plan, that is not a rollover. That is you borrowing from that plan, with an obligation to repay that plan.

Money you borrowed from another plan is not self-employment income, and cannot be used to make new contributions to a new plan.

Patricia Joseph · Answer

@Brian Eastman yes, I understand that the loan from the 401k has to be repaid, which we will repay through payroll deduction. Are you saying that the loan proceeds can't be used to fund the self-directed 401k?

Brian Eastman · Answer

@Patricia Joseph

You cannot do what you propose. When you take a loan from a 401k, that is no longer 401k money. It is money in your pocket and you are obligated to repay the source 401k plan.

A self directed IRA or 401k may be funded with a rollover from an IRA or a 401k plan of a former employer. You can also make new contributions to such plans.

Chris Armstrong · Answer

@Raj Vachani Thanks for the information. I will look into those sites. I am trying to figure out my 401K right now because its my current employers offering so I don't think I can change it to a self directed yet, but I am looking for a place to park some other funds I have as well. I don't have much experience in flips or rehabs yet so I figure that sort of investing could be good in the meantime. Ideally i would find a JV opportunity with someone who has that sort of experience and it could go from there but that can take time to find and build that relationship.

Patricia Joseph · Answer

@Raj Vachani very interesting that you mentioned with a self directed 401k you don't need a custodian and have full check writing authority. Can you provide more info? Is it possible to take a loan from an employer 401k and place those funds into a self-directed 401k?

Michael Lee · Answer

Hello and welcome to BP! One way to do real estate is to go with a turnkey investor like Mempis Invest. You can also go with a more active partner to be involved in that. Good luck!

Where to park my self directed 401K / IRA Money

Where to park my self directed 401K / IRA Money

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