Buying Real Estate in your IRA or 401K [Step-by-Step]

Did you know you could buy real estate in your IRA or 401k? Well, maybe you did, but do you know what steps to take in order to actually do it? Well, in this video today I'm going to explain the rules and the seven steps you need to make in order to pull it off. Now, my name is Mark J. Kohler, CPA attorney, bestselling author, and I love real estate and I love the American dream. But I myself have bought multiple pieces of real estate. I bought crypto, I do crypto mining and I've even bought cows all in my IRA, HSA and even 401k. So I'm living what I preach and, and I'm going to break it down now. Now let's get rid of a few myths. First, I want you to know there's no tax or penalty to get this process started. Don't listen to your broker or investment advisor that's trying to talk you out of this. There is no penalty. When you transfer an IRA to a different IRA account. You're simply just moving your brokerage IRA to a self directed IRA actually where their fees are less. We do not take a percentage of directed IRA when you go out and self direct your ira. We just have an annual account fee. Then you go out and make millions if you'd like. Remember, your IRA is going to buy the real estate, not you. So we're going to probably use an LLC to give you some asset protection. But you get to control the checkbook, you get to control the llc, make decisions and your retirement account is now investing in that real estate down the street, across the country. And one other thing, why are we doing this, people? It's because we want a better rate of return. We know interest rates are going to be coming down, inflation is already on its way down and real estate prices are going to be going up. We are in a market to buy right now and our retirement account might be floating around at 5 or 10%, that's fine, but let's take control of it. Invest in what you know. If you already have a feel of what type of real estate you like, let's get you investing your retirement account in that type of real estate. So I want you to have more control, get a better rate of return and actually know what you're investing in. Okay, so let's get to the steps. Step one, do an inventory. And what I mean by that is find out what accounts you do have now and how much they're worth. This is a good thing to do on a regular basis anyway. Create a little spreadsheet and start looking at your retirement accounts that you have. IRAs, maybe Roths, traditional 401ks. Get the account number, where are they and how much is in them and maybe a little note of what you're invested in. This is going to be a revelation in and of itself. Now when you go to self direct, you don't have to invest all of it in real estate. You get to pick and choose and you're going to find out how much do I have to play with here? Do I have enough to do what type of deal? Let's do the inventory first and see how much you have to work with. Number two, decide on what type of real estate you want to invest in. I want you to be intentional, I want you to have a plan and when you do that you're going to make better decisions. Do you want to invest in raw land, short term rentals, long term rentals, storage units, ranch and farmland, even mineral rights, water rights, for crying aloud. You could buy a downtown LA high rise or Mississippi swampland. It's all real estate. And if you've got an angle on it, let's get your IRA or 401k in that position. Number three, it's now time to open your new self directed IRA account. Remember that inventory you did, the money sitting over there in some brokerage account or multiple brokerage accounts. But we've got to have an account to move that money into that allows you to self direct. Well my partner I, Matt Sorenson, we set up directed Ira 7 eight years ago and we're now the fastest growing trust company in the industry with over 1,000 five star rating. We're regulated by the feds, the state, everything. So you're going to take that money and open a new account, a directed ira, where from there you're going to self direct it. You get to decide where that money goes. A new account's like 500 bucks or less and the annual fee is about the same. We don't take a percentage of any money you make or the value of the account. This is where you start saving money too. So you go online, open up an account based on the account you're going to transfer over. So if you've got an ira, you're going to open an IRA account. If you have a Roth, you'd open a Roth account. If you, if you have a solo 401k, you open a custodial account for that 401k. So any of those retirement accounts can be self directed. So now we're as easy as 1, 2, 3. You've identified your money, you've identified what type of real estate you want to do and you've opened your account. Number four, decide on how much you want to deploy in real estate. Will 20 grand be enough for a down payment on the project? Do you need 50 grand? 100 grand? 200 grand? What's the plan? What's the idea that you want to invest in? And guess what? You can pool retirement account money within your family, have them open an account and say, let's do this together. Let's go out and form an LLC and get the money together that we need to go do the real estate project that we want. You can even get a loan from banks that loan to IRAs, not even relying on your credit. It's called a non recourse loan. And here's a pro tip, if you're going to go do a rehab or maybe furnish a short term rental, make sure that you bring over enough money to your accounts to not only fund the project, but to make sure you get it launched and down the road with enough reserves to really make it happen. And the next part of this step is to actually move the money. Really straightforward. The team at directed IRA with our chat line and phone, always a real human in the us Picking up that line will help you transfer those funds from your old brokerage account into your directed IRA account. And remember, no tax, no penalty is still your retirement account. You just have a new broker dealer. It happens to be directed IRA who listens to you and you only. Now number five, where are you going to do this real estate deal and why I want to know is because that's where you're going to set up your LLC to hold that real estate. You don't want to hold real estate in your own name and you don't want your retirement account to hold that real estate in its own name either. You're going to be making decisions on behalf of the project. You don't want personal liability. And again, you might be pooling money from other accounts of your own, your family or friends. And so you want an LLC to take control of this project, to have its own bank account, its own ein. By the way, this is not an LLC you'd set up online at LegalZoom. It's going to have a lot of IRS rules and provisions to help you not commit a prohibited transaction. Because in this LLC you can't compensate yourself, pay for your own cell phone or your own travel. This is your IRA's money. And there's some rules you want to follow in that process and a couple other pro tips. You get to be the manager of this llc and we're going to set up the LLC in the state where the real estate's located, not in Wyoming or Delaware or Nevada. And the law firm is going to be there to help guide you through what those rules are. Another side note, I've got an awesome podcast that we've done hundreds of episodes called the Directed IRA Podcast. We walk through any additional details and again, you can always call the team at Directed IRA in this process for that same startup filing fee of opening your account. That is so reasonable, you're going to love it. And one last note. In this process, once you decide where you're going to invest in the real estate, an LLC just makes sense. A limited liability company of which you get to be the manager. And the team at Directed will probably encourage you to have a consult with our law firm, which we have been doing the same strategy for 20 years. We'll walk you through the steps and make sure it's handled right. And all of your questions are answered. Very affordable. They'll quote you the price if it's needed. And you're off to the races. Number six, we're almost there. You've got your LLC set up now. Now it's time to fund the account. So the LLC is going. You've opened a new bank account and you call Directed IRA and say, send my money over there. And they would ach wire whatever you want. The money you need that you've decided to deploy in that LLC to go buy your real estate again. You could be the manager of this account, write the checks, hire contractors, hire bookkeepers, lawyers, realtors, anybody you need to get the project done. You just can't go out there and put on a tool belt and work on the project. One of those prohibited transaction rules you'll learn about. Number seven, let's bring it all together and go buy that real estate. Let's bring together those dreams of a legacy and a retirement and the ability to be involved in it and understand what you're investing in. That's the beauty of self directing. You're bringing together your personal knowledge and the things you love doing with now, an ability to see that bank account and that future retirement grow. So to get started, you've got the seven steps and this can just happen within a few weeks once you make a decision to move forward. That's the one thing I want to encourage you to do. No matter where you do business on this spectrum, whether you use our company or not, take action to take control of your retirement account. So if this was exciting to hear about, please click down below to learn more. Open an Account Check out our podcast. We have so much free information to help you on your journey to better live your American dream.