How can I use a retirement account to finance real estate?
Posted by Retirement Advisor
Rodney G asked:
I am interested in using my retirement funds to purchase a new beach property while prices are down and I believe that within 10 years that investment will be much better than stocks bonds etc.
I was told by another person not on this forum that the funds could be transferred into a “profit sharing plan” and from there could be invested in whatever manner the manager sees fit. The plan would be a corporation and as long as the manager (me) did not use the property for other personal things and any rents were paid directly to the plan that this would be a qualified investment> any thoughts?
GROVER
I am interested in using my retirement funds to purchase a new beach property while prices are down and I believe that within 10 years that investment will be much better than stocks bonds etc.
I was told by another person not on this forum that the funds could be transferred into a “profit sharing plan” and from there could be invested in whatever manner the manager sees fit. The plan would be a corporation and as long as the manager (me) did not use the property for other personal things and any rents were paid directly to the plan that this would be a qualified investment> any thoughts?
GROVER
November 8th, 2008 at 3:03 am
You can take a loan against a 401(k), if you have one. You can cash in IRAs, but you will have to pay tax plus a penalty, if you are under 59-1/2. There are no provisions to the law that allow you to take the funds from an approved account and invest it in real estate because you believe it is a better investment.
November 9th, 2008 at 9:06 am
In theory you can have your IRA do such an investment, but you have to ensure that your hands do not use the property for personal reasons. (You certainly can’t live in or vacation in the property.)
the few IRA custodians that will help you do this charge extremely high management fees.
November 12th, 2008 at 6:35 pm
Although you can take out a loan for your investment, you cannot use a hardship withdrawal because this is not going to be your primary residence. If it was, you could withdraw for that, the birth of a child, a marriage or higher education expenses.