Real Estate Investing with a 401k?!

[Ethan Grier]

Hey BP, 

I'm trying to figure out options for REI with a 401k. I've read about a few users on BP doing it, but I'm still not entirely sure how it works. The main reason I'm interested in doing this is that my company offers a pretty generous matching program that I'm fully vested in. I'd like to take advantage of it, but I've been holding off due to wanting to use the extra cash to save for a down payment for a house hack in the short term, but in the long term also invest in other rental properties.

If there would be a way to utilize my company match while still investing in real estate, it would supercharge how fast I'd be able to save and invest - I'm just not sure if its possible. 

Does anyone have any experience in this? Thanks in advance. 

[Bernard Reisz]

@Ethan Grier You've gotten some great info on this thread from @Kevin S. & others. 

Following are some key points to provide additional context (there is some simplification, but the the concepts are all there):

• A tax-sheltered retirement account - 401k/IRA/QRP. - is just a "bucket" that can filled be with assets that can grow at an accelerated rate due to favorable tax treatment.
• The tax code says very little about the type of assets that can be invested in within a tax-sheltered retirement account.
• So, from the perspective of the congress and the IRS, mutual funds and real estate are equally OK for tax-favored retirement accounts.
• For a variety of reasons -some good ones and some not-so-good -  standard IRAs, 401(k)s, & other QRPs impose "artificial" restrictions on the assets that the account can be invested, thereby restricting you to the provided "menu" of investment choices.
• However, although congress and the IRS don't have much to say about what type of assets your 401k/IRA/QRP - they do care about "self-dealing" with those accounts and have put in place rules to prevent that.
• "Self-Dealing" is the use of a tax-sheltered account for your current benefit, rather than the long-term growth of the account.
• To prevent such self-dealing, the rules keep you and your QRP/IRA/401k from doing business together or from you deriving a current benefit from your QRP/IRA/401k.
• Therefore, doing a househack with a QRP/IRA/401k is probaly not a good way to use such accounts for real estate.
• You can of course use them for any type if real estate debt or equity opportunity from which you don't derive any current personal benefit.

@Yonah Weiss Thanks for the favorable mention and kind words!