🏡 Is It Smart to Use Your 401(k) to Invest in Real Estate?

John Birch • November 13, 2025

The short answer: yes, you can — but it depends on your goals, risk tolerance, and how you structure it.

For many people planning for the future, their 401(k) is their largest source of retirement savings. But with Florida’s thriving real estate market and rising property values, it’s natural to wonder — could I use my 401(k) to invest in real estate?

The Basics

Most traditional 401(k) plans limit your investments to stocks, bonds, or mutual funds. To use your retirement funds to buy real estate, you’ll need to roll over your 401(k) into a self-directed IRA (SDIRA).

This special type of account allows you to invest in alternative assets, including residential or commercial property, land, or even real estate notes — all within the framework of your retirement account.

Potential Advantages

1. Diversification

Real estate offers a strong hedge against stock market volatility. It provides a tangible, income-producing asset that can balance out a traditional investment portfolio.

2. Passive Income

Rental income generated from investment properties can grow tax-deferred inside your retirement account. That means more long-term compounding potential.

3. Long-Term Appreciation

Florida real estate has shown consistent appreciation over time — especially in high-demand markets like Tampa Bay, St. Petersburg, and Sarasota.

4. Tax Advantages

If your SDIRA is traditional, your earnings grow tax-deferred. If it’s a Roth, your profits could be completely tax-free at retirement.

Important Considerations

1. IRS Restrictions

You can’t live in the property, rent it to family, or pay for expenses personally. All costs — maintenance, taxes, insurance — must come directly from your IRA account.

2. Liquidity

Real estate isn’t as liquid as stocks or bonds. If you need quick access to funds, it may not be easy to sell or withdraw.

3. Property Management

You can’t perform repairs or maintenance yourself; everything must be handled by third-party vendors.

4. Market Risk

While real estate often appreciates, markets fluctuate. It’s essential to research the local market thoroughly before committing funds.

Alternative: Borrowing From Your 401(k)

Another option is taking a 401(k) loan, which lets you borrow up to $50,000 or 50% of your balance (whichever is lower). You’ll pay yourself back with interest, but if you leave your job or can’t repay on time, penalties may apply.

The Bottom Line

Using your 401(k) to invest in real estate can be a strategic move — but it’s not for everyone. If you’re financially stable, have a long-term vision, and understand the tax rules, it can be a powerful way to diversify your retirement portfolio.

For those exploring real estate opportunities in Florida, Birch Real Estate Services is here to help. From evaluating investment properties to analyzing rental income potential, our team provides expert guidance tailored to your goals.