Funds You Can Use

You can always use cash from your checking or savings account to buy real estate. However, when using retirement funds, there are certain funds that can be used.

Account Types that CAN Be Transitioned to Self-Directed IRA (SDIRA) Accounts

  • Traditional IRA
  • Rollover IRA
  • Roth IRA
  • 401k (see below)
  • 403B
  • 457
  • TSP
  • Solo-k/Individual-K
  • Roth Solo-K/Individual-K
  • Qualified Annuities (there may be a surrender penalty)
  • SEP – Self-Employed Pension
  • Defined Benefit Plan
  • Beneficiary / Inherited IRA
  • HSA – Health Savings Account
  • CESA – Coverdell Educational Savings Account

Here are some 401k Facts that will help you navigate using your 401k to invest in real estate:

  • If you have funds in a 401k from an OLD employer, you can move those funds over to a SDIRA and buy real estate with the funds.
  • If you have funds in a 401k from your CURRENT employer, you typically can’t touch those funds while you’re still employed (there are, however, 2 exceptions).
  • Exception 1: If your balance is at least $100k — Many 401(k) plans allow you to take a loan of $50k as long as your vested account balance is at least $100k. You pay interest on the loan but you pay it to yourself and you must pay off the balance within 5 years (but you can use the cash flow from the property to pay it off).
  • Exception 2: If you’re over 59 1/2 years of age — Many 401(k) plans allow you to take an in-service withdrawal at 59 1/2 years of age or older and roll-over at least a portion of your funds to a SDIRA.
  • Another Helpful Tip: If the funds in your 401k ARE usable but you just don’t have enough funds available to purchase a property, you can combine them with funds from your IRA, cash from your checking or savings account, or pool money with a spouse, family member, or friend to buy a property.