Not many of us with 401k know that we can use that money for investment purpose outside the investments of the account as well. With a little bit of creative thinking though, you can make your 401k grow! There is a safe and risk free way to gain more profit for your retirement funds. Real estate investing in today’s economy is what we’re talking about.
When investing in real estate, you want to use as little of your own monies as possible. That is where your 401k comes into the scene. With 401k’s you are able to take a loan against your account. Taking that money and invest in a short term real estate deal will net all your money back plus some. You then pay back the loan in full and then will have funds left over to invest again. This transaction has not come out of your pocket directly nor affected your daily cash flow. You simply borrowed from yourself, paid yourself back and net a profit too!
There are rules and procedures in borrowing against a 401k that you should know as well before you go forward with this plan. There will be a cap for the amount you can borrow on your 401k. First it can depend on how much you have in your 401k to start with, and normally the cap is at $50,000. You must also know that you can not take any mortgage-interest tax deduction with this type of transaction either. Using your 401k to finance a real estate transaction does not have any tax benefits.
You can also borrow from your 401k and put the money into an individual retirement account, also known as an IRA. This allows you more flexibility on what you can do with your money, but you may be penalized for moving your money from a 401k account to an IRA account. Depending on the amount of the penalty, you may decide it’s worth the profit you’ll make from the real estate investment. Regardless your choice, keep your goal to be short term loan and to repay yourself as soon as you close the real estate deal!
If you aren’t a risk taker, there are other ways to use your 401k to invest in real estate, such as real estate investment trusts. There are companies that buy and sell real estate using funds from real estate trusts. It is less risky and less work for the individuals that are investing. The trust companies are responsible to make the investors money and they do all the work.
If however you are interested in becoming a private cash investor with an experienced group of real estate investors, rehabbers and rental property owners, then look no further. You are on the right site to invest wisely and earn up to 10% on your hard earned dollars.
If you are interested in finding a great resource about real estate investing Click Here!
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