Borrowing from your 401k question!

[Cam Jimmy]

I've been aware of the strategy of using your 401k to borrow money from to buy real estate for some time now. You can borrow up to $50k and pay interest to yourself... got it...awesome. However, in my area the houses and multifamily buildings are not cheap. The average house probably costs 250-300k, and probably 400k+ for a duplex. SO here is my question, IF I had multiple 401k accounts (1 vanguard 401k, 1 fidelity account, etc..) could I borrow 50k from each one? That way if my and my wife each had 2 accounts, we could borrow 200k to purchase real estate with. Is this even possible, and if so has anyone ever done this? I hope I am on to something here!

[Justin Windham]

@Cam Jimmy

While there are other considerations to taking that amount of money via participant loans, it could be possible to do what you asked. If you had a Solo 401k plan and another qualified plan with an unrelated employer, and your wife also participated in the Solo 401k and had another plan with an unrelated employer, it could be done. Each plan would have to allow for participant loans and you and your wife each would need at least $100k in each of your respective accounts.

Because it would be rare to be in that situation and because there are definite caveats to taking out so much money in participant loans, you might treat this as a more theoretical response of what could be done rather than what you should actually do.

There are other sources of financing that could work better for you, perhaps in combination with some participant loan funds, but $200k... wow!