Many Americans have traditionally leaned on personal retirement savings accounts such as 401(k)s as an investment in their future. However, some concerns are associated with them compared to other investment options, such as:
- Limited investment control
- Fees and expenses
- Market volatility
Others are enjoying some of the potential benefits of real estate, such as:
- Appreciation
- Diversification
- Hedge Against Inflation1
- Control
- Cash flow
For those with money tied up in traditional retirement savings accounts, it’s easy to look at these potential benefits and wonder, “Can I use a 401k to invest in real estate?”. Fortunately, you can! But it takes a specific type of 401(k) account. Additionally, Canyon View Capital can help.
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Can I Use a 401k to invest in Real Estate?
If you’re asking yourself, “Can I use a 401k to invest in real estate?” the good news is that you can! However, a noteworthy caveat is that it’s a little trickier than using a conventional 401(k).
That’s because while 401(k)s traditionally allow you to set funds into an account and the fund manager decides where to invest the proceeds, investing in real estate with a 401(k) requires the use of a self-directed 401(k), sometimes referred to as a solo-401(k).
Traditional 401(k)s vs. Self-Directed 401(k)s | ||
How Do I Use a Self-Directed 401(k) to Invest in Real Estate
So now you know more about self-directed 401(k)s and what distinguishes them from traditional accounts. Now what? Next, if you don’t already have one, you’ll need to know how to set up and use a self-directed 401(k) to invest in real estate.
Investing in real estate through self-directed 401(k)s involves specific steps to ensure compliance with IRS regulations. The following is a general but not comprehensive guide on how to do so.
Other Important Considerations
While using a self-directed 401(k) to invest in real estate can help diversify your portfolio and add a new source of income, one important factor to be aware of is that income generated from real estate purchased with a self-directed 401(k) must be returned into the account in the same way that funds generated from stocks and bonds are returned to a traditional 401(k). Additionally, all payments and expenses should be paid from the 401(k) account.
It’s also important to note that investing in real estate comes with uncertainties and risks, like all investments. This is especially true when utilizing a self-directed 401(k) due to the increased responsibilities of these accounts and the additional IRS rules and regulations. Consult your financial advisor or tax professional before making significant investment decisions.
These factors add many extra layers to 401(k)s that some investors may find offputting, especially given the relatively passive management of traditional 401(k)s. However, there are ways for accredited investors to streamline their level of responsibility while still enjoying the potential benefits of investing in real estate with their self-directed 401(k) with Canyon View Capital.
Streamline Your Investment with Canyon View Capital
Can I use a 401k to invest in real estate? You sure can! While managing a self-directed 401(k) may seem daunting, Canyon View Capital can streamline your responsibilities by removing many property management responsibilities.
That way, you can bolster your 401(k) with truly passive real estate income. At Canyon View Capital, we’re passionate about real estate and channel that passion into our diverse portfolio of multifamily properties.
Ready to upgrade your portfolio with diversified, stable investments?
Canyon View Capital manages, owns, and operates real estate valued at over $1B2. Our buy-and-hold strategy, concentrated in America’s heartland, is designed to provide consistent investment returns.
Want to learn more about how to set up a 1031 exchange? Reach out today!
2$1B figure is based on aggregate values of all CVC-managed real estate investments as of March 31, 2023.
Eric Fisher, Chief of Staff
Eric joined Canyon View Capital in August 2021 with 15 years of hotel management experience grounded evenly between Property & Corporate Operations, and Business Development & Acquisitions. After $500M+ in hotel acquisitions, Eric uses his nuanced understanding of the acquisitions and transitions processes to support CVC real estate investments. His professional versatility makes Eric an invaluable resource for the President and Executive Team in all business functions, including Investments, Operations, and Strategy.
