How do you feel about 401K/IRAS for funding?

Question

I have to do more information on this topic but have any of you investors use this technique to fund one of your deals?

Brief summary what I know on it. So basically you use someone’s 401K plan and IRA to fund you deal and they receive a interest back and I believe more than they have saved for retirement...

Educate me! Let’s talk about it!

George Blower · Answer

@Mysonne Johnson

In short, a person who is not related to you and who has access to their retirement funds (e.g. in a former employer plan or IRA) could lend money to you (or your entity) as an investment (e.g. promissory note whether secured/unsecured).   If the person is self-employed with no full-time employees, the person could set up a Solo 401k through a provider that allows for alternative investments.  Otherwise, the person could set up a self-directed IRA such as an IRA LLC to make the same investment.

Taylor L. · Answer

For me it's been more or less the same as my investors whose investment comes out of a cash non-retirement account. Lots of folks aren't aware that they can access those funds to invest in real estate, so educating is a big opportunity. However, we need to be careful to refer them to the proper experts and not to provide them guidance we're not qualified to provide.

Ilan M Aliphas · Answer

@Mysonne Johnson I’m currently reading the book on taxes from bigger pockets “Tax Strategies for the Savvy Real Estate Investor”.  There is a great chapter on this topics that details how to and the benefits of a Self Directed 401k and IRA.  You should take a look.

Ive not done it yet but taking steps to do it soon by taking to my RE CPA about it tomorrow.  Investing my tax-free savings into RE sounds pretty amazing and completely possible according to this book.

Steve Vaughan · Answer

I use private lenders,  but not with retirement money. Too much work.

Say you get educated enough to do this properly.  For IRAs, they will first have to transfer to an SDIRA custodian. Complex multiple hurdles.

401k? Can't touch it other than to borrow from it if still working there.  Maybe they can borrow from their plan, then lend you the money.  Multiple steps again.

Just find someone earning nothing on current cash not inside a retirement plan is what I'd do.

How do you feel about 401K/IRAS for funding?

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