Real estate is an attractive option for numerous investors due to its potential benefits. Yet, some investors have significant funds tied up in restrictive 401(k) accounts. Although 401(k)s are designed for retirement savings, they offer limited control over fund selection. Therefore, it’s quite common for investors to wonder how to use their 401(k) to invest in real estate.
For starters, it’s possible. However, using a 401(k) to invest in real estate requires a specific account type. In this article, I will explain how investors can use funds from a self-directed 401(k) to invest in real estate.
How to Use a 401(k) to Invest in Real Estate
While you can use funds from a 401(k) to invest in real estate, you cannot do so with a traditional company sponsored 401(k). Conventional 401(k)s are typically limited to investing in investment vehicles such as stocks, bonds, and mutual funds, and the bank or brokerage in charge of the account makes all investment decisions.
You can use a self-directed 401(k) to invest in real estate because the account holder (you) is in greater control of how the money is invested—and, one of the additional investment options afforded to account holders is the ability to use account funds to invest in real estate.
Before I tell you how to use a 401(k) to invest in real estate, let’s start with the eligibility requirements for a self-directed 401(k). To be eligible for a self-directed 401(k), you must be one of the following1:
- Actively generating a portion of income through self-employment
- A small business owner with no employees
- Independent contractor with part-time employees
- An owner of a dormant 401(k) that is able to be rolled over into a self-directed 401(k)
By opting for a self-directed 401(k), you expand your investment horizons significantly, allowing for a broader range of options, including real estate investments.
It’s important to note that while self-directed 401(k)s allow investors to enjoy alternative investment options such as real estate, enhanced flexibility comes with greater complexity, a significantly increased burden of responsibility, and risk. Always consult your financial advisor before committing to a new investment plan to ensure it aligns with your investment goals.
If you’re an investor with a self-directed 401(k) or potentially opening a 401(k) to invest in real estate, Canyon View Capital may have options for you.
Canyon View Capital Offers Investment Options for Self-Directed 401ks
At Canyon View Capital, our deep-rooted passion lies in multifamily real estate, which forms the core of our every endeavor. This commitment is precisely why we offer investment avenues for those wondering how to use a 401k to invest in real estate.
Whether you’re an investor ready to jump in head first or one that wants to use their 401(k) for real estate but is wary of the increased complexities and nuances, our investment products— backed by our portfolio of multifamily properties—offer potentially passive real estate income as well as tax advantages via passive losses which can potentially lower tax burdens. In addition, you may enjoy greater liquidity versus traditional 401(k)s and traditional real estate investing.
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1, Troy Segal, “What Is a Solo 401(k) or Self-Employed 401(k)? Contribution Limit,” for Investopedia, Nov. 28, 2022, Investopedia.com. Accessed Sep. 8, 2023.
2Miranda Marquit, Benjamin Curry, “How To Roll Over Your 401(k) To A New 401(k),” for Forbes, Oct. 23, 2022, Forbes.com. Accessed Sep. 1, 2023.
3$1B figure based on aggregate value of all CVC-managed real estate investments valued 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.