So is it possible to use money from a 401k to purchase a park?
I know this has been discussed before, just could not find the post.
I have about 100k cash and 175k in a 401k and I would like to use together to pi k up a decent park …
Thanks for comments
I have looked into this with my 401k and I’ll try to answer it the best I can. Mine will allow for a loan of up to 50% of the value of the 401k. In your case, if the same applies, the principal would be $87,500. The terms of the loan can vary and you should be able to have some flexibility as far as how long you can use the money. The basic idea is the loan is taken out of the 401k, over time, your principal payments and interest get reinvested back into the fund. In the event of a missed payment, there will be tax implications for cashing out the fund early. My advice would be to talk to the people who manage your 401k. I’m not sure if you actually need to give a reason for the loan if that was actually the question. Also, I’m not sure how this effects your yearly contribution limit either. Might be another good question to ask a CPA.
Put this in the forum search box: retirement Look for the heading: Tax strategies for cash-flow money in MHPs
Taking a loan out of your 401(k) is one way to do it. Another is the “self-directed” account which is discussed in the “Tax strategies” thread. If you take the self-directed route, talk to a tax attorney because there are lots of pitfalls. For instance, you can’t actually do any of the work in the park outside of high-level management decisions–if you so much as change a lightbulb you risk causing the retirement account to lose its tax-advantaged status. So that only works if you’re going to buy a park and hire someone else to run it (and I mean really run it, not just hire the on-site manager). You can also invest in "someone else’s park."Google “IRA prohibited transactions” and you’ll find a wealth of information.Finally, there’s a complicated tax maneuver with the acronym ROBS where you start up a C-corporation, put yourself in as the only employee, establish a 401(k) plan, roll your pre-existing 401(k) into the new 401(k), have the 401(k) buy the stock of your C-corp. In this way you can access the money and do whatever work you want in the park, but you’ve now negated the tax advantage of the 401(k) because the C-corp needs to pay corporate taxes.My advice is either take a loan out of your 401(k) as described by Charles, or set up a self-directed account and use that to invest with someone else who needs capital to buy a park.
If you go the SDIRA route, set up separate SDIRAs for each investment you make. Observe carefully the laws about not self-dealing (e.g. doing too much work in your park). If the worst happens and the government claims you’ve done too much work to help your retirement, then at least ‘only’ that SDIRA will pay the penalty on whatever was invested in it. Having separate entities for each of your investments (SDIRA vs. regular money, LLCs for MHPs and LLCs for MHs, etc.) is a prudent asset protection precaution to take.-jl-