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How Can I invest My 401k in Real Estate?

By: Gregg Cohen, CEO, JWB Real Estate Companies
March 6, 2015
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One beauty of having a qualified retirement account is knowing that the earned income will grow without applied taxation. For most adults, this means annual investments into a 401k or other account could later be used during retirement years. A lesser known method of building more income through retirement planning is investing in real estate. If you have ever asked how can I invest my 401k in real estate, you are not alone. 

Can a 401k Legally Own Real Estate?

The rules of every retirement account direct adults what they can or cannot do in terms of an investment. A 401k is one of few types of accounts that can legally own standard or rental real estate as long as the rules are followed. Because most people have a managed account through a trustee, getting approval to purchase a property for direct use as an investment could be a roadblock. A rollover into a self-directed plan could be a better option.

Pros of Investing in Real Estate with Your 401k

A solo or an employer sponsored plan could be eligible to own a rental home. This provides the wealth protection that a person who is not interested in diversifying through a mutual fund can seek. 

Most formations of an IRA account access fees on distributions that are taken before age 59½. Real estate cash that builds inside of an account can be tapped into at age 59½. This provides one of the fastest growth strategies available to adults.

A Roth conversion is available for most forms of a 401k to help an account owner take advantage of tax-free income growth. Many forms of accounts could qualify for a real estate purchasing including simple IRA, SEP, 403b and other sponsored plans.

How to Use Your 401k to Buy Real Estate

IRA funds can be borrowed against to complete a purchase in the housing industry. This can be a strategy that is right for a larger percentage of adults who cannot put up their own cash to buy a rental home. Non-recourse loan lenders are available to guarantee a loan if financing is needed to cover the remainder of an investment home purchase. 

The possibility of buying a house that will produce monthly rental income is available to all adults nationally. One of the simplest methods of buying a property is to use a turnkey company. This provides a managed home that already includes a lease agreement. More information about 401k real estate investing strategies can be found in the free investor guide on this website.

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