Using my 401K to buy my first rental

[Ira Sullivan]

So my wife and I are beginning REI in Alabama. My wife has a 401K worth 39K from her old job. After studying for the last 6 months, we would like to use the BRRRR strategy to start in real estate. We would like to buy properties worth 35K or less, with a 100K ARV and repeat the process. At this point we would like to partner with a more experienced investor so that we can learn the process.

Should we move my wife's 401K to a Self-Directed Roth IRA? Also, what other advise would you guys recommend.

[Dmitriy Fomichenko]

@Ira Sullivan

You can use self-directed IRA to invest in real estate. But as Mitch suggested it is imperative you understand the rules. Investments you make with your IRA will not be your personal investments. IRA/401k is a separate entity from you. And you are not allowed to commingle your personal investments with your IRA. For your personal deal you need to use personal (non-qualified) resources.

Also if the 401 is pre-tax you can't just move it to Roth IRA. You would have to perform a Roth conversion. This is a taxable event so be sure to run the numbers with your CPA so you are fully aware of the tax consequences.