401k -> RE

I have a little cash in a 401k, just over $1000. At this point I am no longer contributing to it and its not generating much return compared to what REI would bring. Is it possible to take that money out and put it into real estate investments without getting taxed? Would I need something like a self directed IRA to accomplish this? This isn’t a ton of money so if I got taxed it wouldn’t be the end of the world but frankly I’m sicking of paying taxes.

I believe you would need to roll it over to a self directed Roth IRA… but hey once you do that I believe you may flip as many homes as you want and not have to pay income tax as long as the money stays in the RIRA.

I am not 100% sure on this information though, but I am sure someone else can verify.

Hopefully someone can confirm that. Now for another question:

If I have properties owned within an IRA can I keep some of the cash in it when I sell a property for a profit and take some of it out as income (taxed of course)? I would want to keep as much in there and protected from the tax man and only take out enough to live on. This of course would be when I am a full time investor and no longer have a regular J.O.B.


I have just read, not practiced, but you have to have a very clear distinction between Roth funds and “personal” funds.

If you bought a property with 20% personal interest and 80% IRA interest and then split up the profit accordingly, I think there are ways to get away with that.

If you siphon money off your IRA before you are 59.5, then you get hit with income tax at whatever bracket you fall in and a 10% hit for early distributions.

If you are going to do that much flipping, just put every 10th house in your own name and the other 9 in the IRA.

My very worthless two cents…


you’re getting way overworked for $1,000. take the money out and do what you want.

$1,000 in a self-directed IRA is worthless. You are prohibited from jointly owning property with your IRA (self dealing) and the amount is too small to put into publicly traded limited partnerships or to own a complete property by itself.

It’s more of a question to determine better for my own education how things work rather than an effort to save a few hundred bucks.

I personally use Sterling Trust Company for my self-directed IRA. their website has much useful information if you want to learn more.

You can not directly jointly own a property, but you can jointly own a company with your IRA and yourself correct?

Therefore if you property in an LLC or another corporate vehicle, it can be jointly owned?

Please correct me if I am wrong, I am trying to learn.


I think it can own a house, just not the house you live in…

I am asking if you can jointly own a corporation between your IRA and your person?

If so, then you can own real estate “jointly”. You could even own a house that you live in as long as you are paying yourself rent.

Mcwagner, can you tell me if I am right or wrong on this assumption?

Thanks for your advice.



Neither you nor any other disqualified person can have any personal use or benefit of the property while it is held in your retirement account. The property must be purchased for investment purposes only.

In general, Internal Revenue Code Section 4975 defines a prohibited transaction as a transaction between a plan (your account) and a disqualified person. Generally, “disqualified persons” are defined to be the accountholder, other fiduciaries, certain family members (including lineal descendents and spouses of lineal descendents), and businesses under the accountholder’s (or disqualified person’s) control.

Thus, jointly owning property with an entity that you own or control >50% is a prohibited transaction. If jointly owning property with an entity that you own or control <50%, you will probably need a written opinion from an ERISA or tax atty before the administrator will process the transaction.


So let me understand this correctly

Strike 1: I can’t own a property in a corporation and then have shares of that corporation in my IRA and live in the property. Even if I am “renting” the property from my corporation, that is still no good?

Strike 2: I can’t jointly own a corporation with my IRA? Or I have to own less than 50% and then my IRA can own some of the corporation? Can my IRA own 49% and I own 49% and then give a minimal ownership to some 3rd party?

Thanks for answering these questions, I appreciate it.


you’re dancing with the devil here. Professionally I’d ask why you are even still pursuing it unless you have some real need for this type of arrangement.

If you are seriously considering this type of arrangement, consult an atty.


I am just asking for the sake of knowing, I am not looking to go out and do it.

I guess I was under the impression I could have an S corp, and have my IRA “own” 40% of the shares and then fill my Roth with “dividends” from the shares its owns through company profits.

Since you seem knowledgable, I am just picking your brain. Thanks.