Skip to Content

Get a FREE assessment of your rental property. Start here!

Get a FREE assessment of your rental property. Start here!

Fund Your First Castro Valley Rental Property with a Self-Guided 401(k)

Model House and Cash in a Miniature Shopping CartInvesting in residential rental properties is safe and profitable but finding and acquiring the funds for a down payment can feel like an insurmountable predicament. Nevertheless, accessing the funds you want to invest in real estate can be easier than you thought possible.

If you have an existing 401(k) plan or an Individual Retirement Account (IRA), you possibly can be able to apply them to fund a rental property purchase in Castro Valley. Additionally, with correct planning, opting to use a retirement account to fund an investment in real estate, could result in little or no tax implications. By employing funds you have thus far, you really can invest in a much more profitable future now.

An IRA or 401(k) is a long-term savings account that can extend many tax advantages in the event that certain IRS regulations are followed. In certain circumstances, these retirement savings accounts are self-directed, that means you can choose how to invest the funds in the account. As an instance, a self-directed 401(k) can be used in mutual funds, bonds, and much more. On another note, the law prohibits direct investment into real estate from a 401(k). To acquire access to your 401(k) funds, you must follow some more needed steps.

To apply a 401(k) to invest in real estate, your choices are either obtaining a loan against your retirement account or transferring the funds in your 401(k) to an IRA account. The complication with procuring a loan against a 401(k) is that it will definitely lead to those funds being taxed, a situation that every investor would rather avoid. This is why the right and better way is to transfer your 401(k) into a self-directed IRA. The transfer itself is typically tax-free. In addition, and unlike a 401(k), many IRA accounts can be used for a wide range of investments, including real estate.

To make a self-directed IRA, you should go through an IRA custodian such as Equity Trust, Community National Bank, IRA Services Trust Company, or others. The new IRA account can be funded by using an existing IRA or rolling over a 401(k), something your IRA custodian should be able to easily help you with. In that case, whenever you are all ready to obtain your residential rental property, you’ll have to submit a direction of investment form and get it approved. Shortly after it’s approved, you can petition for the funds you require to close the investment deal. To do it, the name of your IRA must appear on the title of the property, permitting your custodian to issue funds. You would then maintain an investment property from your IRA account holder.

Because of how that ownership is formed using an IRA, all succeeding outlays and revenue from the rental property would then have to be carried out through your IRA custodian account. This encompasses any proceeds from the eventual sale of your investment property. Immediately after you sell a rental home that was purchased with an IRA account, the proceeds from the sale must remain in the IRA account. The benefit of fulfilling it through this operation is that all these funds are not promptly taxed but, on the contrary, that tax liability will be deferred to upcoming use of the funds.

One more crucial factor to learn in regards to applying a self-directed IRA to finance a real estate investment is that you will be in no position to manage your rental property yourself. In contrast, you’ll have to hire a professional property management company such as Real Property Management to handle the rental’s regular operations. This is not a limitation but rather this process of real estate investing is in line with current business models, where an investment property owner partners with quality professionals to grow their wealth.

There are definitely a few investment options with the stability and potential that residential real estate has to offer. When you contact Real Property Management Masters to collaborate with you in your investment decisions and actions, you’ll be assured that you have a comprehensive and professional team of property management professional staff by your side. We will help you manage everything, from the unsurprisingly common to the time-consuming complications, endowing you with free and focused time to improve your investment portfolio into full financial freedom. Contact us or call us at 510-398-8704 for more information.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.