Can You Use a 401k to Buy Real Estate?

Since real estate investing is the most popular investment option for Self-Directed IRAs, some of the questions our experts get asked the most are "Can you use your 401(k) to buy real estate?" and "Can I use my 401(k) to buy land?" And most investors would like to do this through a rollover so as not to get hit with a withdrawal penalty.

The answer depends on your 401(k) setup and whether you are a current employee of the company that set up your plan.

What to Do if You Have a 401(k) With Your Current Employer

If you have a 401(k) through your current employer, you need to contact either your HR representative or your plan account manager to see whether they allow for rollovers while you are still an active participant in the plan.

• If they do allow for rollovers, you can open a Self-Directed IRA, roll over your funds into your new IRA, and invest in real estate without getting hit with a tax penalty.
• If they do not allow for you to roll over your funds while you're still an active participant, this unfortunately and greatly limits your options. If you are still determined to use your 401(k) funds for a real estate investment, you will either have to withdraw the funds early and get hit with a penalty or take out a loan, which you'll have to pay back to your 401(k). These options vary from plan to plan, and you will need to contact your HR representative or plan account manager to see what your options are.

What to Do if You Have a 401(k) With a Past Employer

• If you have a 401(k) with a past employer that you have not rolled over into a new account yet, you can roll over the funds into a Self-Directed IRA and invest in real estate.

If you have a 401(k) from a past employer and have rolled those funds into a 401(k) plan with a new employer, you may be able to roll those funds back out into a Self-Directed IRA. Some plans might differ, but most have a policy that if money was rolled in, it can be rolled back out. Again, you will have to contact your HR representative or plan manager for your 401(k) policies. Of course, if you have already rolled over old 401(k) funds into an IRA (for example, into an account with Fidelity, Charles Schwab, or TD Ameritade), you can roll over those IRA funds into a Self-Directed IRA and invest in real estate. Interested in Learning More?

Schedule a call with one of our Self-Directed Specialists today to get answers to your questions and find the investment vehicle that's right for you.