401k investing

General Real Estate Investing
1

Has anyone ever invested in properties with their 401k money before? Is it difficult to do? Mike

2

If using 401k money, I suspect that it’s possible that you’ll have to pay taxes and possibly a penatly to withdrawl that money. However if you borrow it, perhaps you can bypass the penalties. This is just an idea, but always seek advice from a professional.

3

Roll your money into a self directed IRA. Like fiserv.com. You can purchase and sell and let your retirement grow. No withdraw fee’s. You buy and sell and return the money to the account.
You are aloud to profit or lose your money just like the retirement account guys. Yes there are rules and easy to follow. You may invest in just about any thing you wish.(see rules) Retirement account people won’t tell you about this because there is no commission in it for them. Most have not heard of it either,There are about 5 companies in the states that will help you invest as you see fit. Self directed really means self directed as in check book controll
Darin

4

Darin is right… look into Pensco, Entrust, and Sterling Trust

5

You have to be careful, I think, about investing in real estate inside a self-directed IRA. I know some people are really stoked about this, but as a tax cpa, I see several big problems (unknown to some of the people selling this idea).

  1. Unrelated Business Income Tax, or UBIT. UBIT will be owed on the portion of your real estate profits that stem from use of leverage. So if you don’ use any leverage, you don’t have to worry about UBIT. But who buys real estate without leverage?

  2. Also, note that your IRA (yes, this is weird, I know) will actually owe a 990-T tax return. This is going to jack your costs. (It’s not a cheap return or one you can necessary do yourself.)

  3. Note that by investing inside your IRA, you’re losing two big tax benefits of real estate investment. First, your real estate profits are all going to ultimately be taxed as ordinary income when you distribute the money. (Much of your real estate profits if done in “taxable” accounts would typically be subject to favorable “unrecaptured Section 1250” 25% capital gain rates and regular 15% apital gain rates.) Second, you get no tax benefit from the depreciation.

  4. Note that something as illiquid as real estate ultimately presents problems inside an IRA because you will need to start annuitizing your IRA balance. E.g., by age 70 1/2, you will have to begin required minimum distributions.

Just some things to think about.