Financing & LoansQuestion 28
Can I Use My 401k or IRA to Buy Rental Property in Houston?
Yes — a self-directed IRA (SDIRA) allows you to invest retirement funds in Houston rental property, though there are strict IRS rules about self-dealing and prohibited transactions.
Retirement accounts can be a source of capital for Houston real estate, but the rules are strict.
- Self-directed IRA (SDIRA): Move funds from a traditional or Roth IRA to a custodian that allows real estate investments. The IRA buys and owns the property.
- Solo 401k: If self-employed, a solo 401k with a real estate investment option offers more flexibility and higher contribution limits.
- Key rules: You cannot live in the property, perform maintenance yourself, or mix personal funds. All income and expenses flow through the IRA.
- 401k loan: Borrow up to $50,000 from your 401k to use as a down payment on a Houston rental. This is a personal loan to yourself, not an IRA investment.
Bottom Line
SDIRA real estate investing is powerful for tax-sheltered growth, but the rules are complex. Consult a tax professional specializing in self-directed retirement accounts before proceeding.