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401K Real Estate Investing May Not Be a Viable Option


When an individual is looking for long term opportunities they may consider 401k real estate investing. Real estate is a long term, income producing investment that is often ideal for retirement portfolios. There are many restrictions however that makes 401k real estate investing less appealing than mutual funds or stocks.

Property investing takes a lot of capital. Purchasing even one property is often prohibitive for most investors without outside financing. It is possible to withdraw funds from a 401k however there is a standard cap on withdraws of $50,000, less depending on the total value of the individual’s account. Negotiating with a seller can be possible at times for if they are promised cash up front for their property they may be willing to lower their price to avoid the lengthy process of financing. Even with that in consideration a property valued at that low a price may not provide the necessary return to outweigh the initial costs.

It is possible to withdraw a small amount from a 401k to use as collateral for a larger loan, funds that can be returned with the profit from the transaction later on. Withdrawing funds unless for specific reasons incurs a penalty, though so this needs to be considered when contemplating this avenue. Also since the purpose of the account is to save for retirement, this choice should be used judiciously and the investor should be certain of the rate of return.

Another 401k real estate investing alternative is to roll a portion of the funds into a real estate IRA. This will provide more flexibility and if it is a Roth IRA, incurs less tax penalties than traditional property investing.

401K real estate investing is limited compared to other types of investment transactions. While it is possible it may not be viable and your ultimate retirement goals should be considered along with the pros and cons of this type of real estate investment. Consult an investment specialist, such as a financial planner, to help you make the best decision for all of your retirement planning and needs.


Source by Claire Geonzon

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