If you’re a full-time real estate investor, you probably have some properties reserved to fund your retirement. However, if you’re a regular investor trying to diversify your portfolio through real estate investments, you may find it difficult to fund the purchase. What is the best way to gain real estate exposure without additional financial burden?

Use your retirement money to invest in real estate!

Yes, it is possible and the IRS allows investing in real estate for your retirement.

Watch this quick tip video:

What do you need to know about a self-directed Solo 401k retirement plan?

Solo 401k is an approved retirement plan for self-employed individuals and owner-only businesses, which allows them to invest in alternative assets including real estate, mortgage notes, tax liens, and tax deeds.

Eligibility: you need to have some type of self-employment income or part-time self-employment.

Solo 401k contributions for 2017: up to $60,000 in 2017 (inclusive of $6,000 catch-up contributions for professional above 50 years)

How to buy real estate with your self-directed Solo 401k retirement plan?

  1. Open a self-directed Solo 401k retirement account.
  2. Fund your account through eligible rollovers and annual contribution.
  3. Find an investment property for your retirement account.
  4. Use your retirement funds to purchase the property.
  5. Your retirement plan will hold the title of the property.
  6. Use non-recourse financing if you run short on funds.
  7. Repairs and maintenance must be paid through the self-directed Solo 401k retirement plan only.
  8. Redirect entire income generated by the property to the retirement plan.

What happens when you retire?

When you reach the eligible retirement age, you can sell the investment property and start withdrawing steady income from the plan, only after making the tax payments.

A self-directed Solo 401k allows you to invest in real estate with your retirement funds, hence offering better diversification and capital returns. Start leveraging the power of real estate investing to live a fulfilling retired life.

Written by: Dmitriy Fomichenko

Dmitriy is the founder and president of Sense Financial Services LLC, boutique financial firm specializing in self-directed retirement accounts with checkbook control. He began his career in financial planning and real estate investing in 2000. He owns multiple investment properties in various states and is a licensed California Real Estate Broker. Over the years, he has instructed hundreds of investment and financial planning seminars and has mentored thousands of investors.