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Updated about 5 years ago on .
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College student starting real estate
Hello, I’m a college student about to graduate this year 2020, but I’m not happy because I’m 27 with no properties. I have a 401K about 25K in there from my last job. Can I use that 25K to get started or will the government penalties me for using my 401K for real estate? I wanted to use the 25K to put down on a house, then refinance it and rent it out. I would love cash flow every month. Being a college student is very tough with money as you may know, so I would like to invest my money smartly and get cash flow. Thank you guys.
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#5 Tax, SDIRAs & Cost Segregation Contributor
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#5 Tax, SDIRAs & Cost Segregation Contributor
- Accountant
- Atlanta, GA
An early withdraw with no known exception will cost you a flat 10% "penalty" tax in addition to potential income taxes.
You may want to look into moving the money into a self-directed retirement account or taking a loan from the 401(k) plan assets.
That said, smart investment strategy is not impulsive. It may make a lot of sense to continue to contribute to your 401(k), focus on finishing up school and starting your career, and then invest in real estate when your life circumstances are more stable.