Scenario for using 401k funds

[Francois Frigon]

Hi,  I'm new to RE investing...  need you to comment on my thinking...

I'm looking to purchase an 21 units apt building for $950k.  I'm hoping to use $285k as a down pay from my 401k (through a Self Direct I presume).  Then, ask for a 25yr conventional loan from WF bank.

Is this scenario realistic?

[Brian Eastman]

@Thomas Rutkowski

Actually, no.  

The IRA owns the property and is the borrower. As the IRA account holder, the investor may not sign a personal guarantee on the note.

In the event of a default, the bank would foreclose and take back the property. The IRA/401k capital in the deal would be a 100% loss, but this is not a distribution to the investor.

If you buy a stock and the company tanks and the stock value goes to $0, it is just a loss of IRA capital with no tax implications. Same thing here.