Bellevue, WA · Member since 2012 · 12 posts · 5 votes
In Feb 2015 I purchased a single family residence where I reside and rent out a room.
In a couple years, once I have saved up enough money for a down payment I want to purchase another single family residence. I will rent out my first house, and live in and renovate the second one.
Currently I have been saving all my money in my stock account. I realized I could be missing out on a lot of money by not taking advantage of my tax deferred accounts.
My current thinking is to max out my 401k for two years and then turn the 401k into a self directed IRA and use it for a down payment.
As you can probably tell I am weak on this issue. Is there a way to use my Roth IRA and a 401k as a down payment for a second property which I will live in for a couple years?
You may not use your IRA or 401k on a property in which you will reside. There can be no direct or indirect benefit between the plan and a disqualified party (you, family).
A self directed IRA or 401k is not "money for you to invest in real estate". Rather, these plans are a way that your tax sheltered retirement savings may be diversified into real estate. Rather than have your retirement savings entirely allocated to equities, you can choose to hold a rental property in your IRA or have your IRA lend money to other investors.
Realtor · Fresno, CA · Member since 2013 · 471 posts · 225 votes
10y
You might want to find out if your employer/ 401K plan offers loan privileges. Then you could borrow the money from yourself - pay yourself back the interest and it has no effect on your DTI since it shows ups a payment out of your paycheck and not as creditor. Also - your 401k balance doesn't drop as a result - We have used this strategy a few and it has worked so far. We are allowed to borrow up to 50% of our vested value. We are actually going to pay off our last our last 401k and then immediately re-borrow the new increased amount since the account has grown some over the last few years. Not all employers offer this option - but it may be worth looking into.