Can you withdraw money from 401K plans, to invest in business properties?

By business properties, mean two family houses, to rehab and resell. Wondering what the tax implications might be, considering I'm re-investing the money.

investing in business will not relief you of taxes === you might be better off taking a loan if the plan allows for it!!!

some plans allow you to take loans from your 401K, but you will have to pay it back plus interest

the other option is cashing out your plan. You will pay regular income tax PLUS a 10% penalty to the IRS (if you are younger than 59 1/2). investing in business property is not an exception to the 10% penalty

Yes, but you will have to pay the taxes and a 10% penalty on any withdrawls of that nature. You could also borrow up to 50% of your 401k balance and pay it back like a loan without paying the penalties or income taxes and you would pay yourself the interest. Although your loan payments will be after tax. I would advise you do neither and get some investors on board, but the loan would be a lot better than a withdrawl. After you consider the 10% penalty and taxes for the 401k withdrawl, lost returns on 401k, and then taxes (income or capital gain) on your rehab house profits how much do you really anticipate in making in profits in a declining real estate market? Just a few things to think about...

depends on if you are still employed by the company. If you are then no you can't withdraw for that purpose. You could take a loan on it though. If its a loan there is no tax implication but the payments have to be over 5 year period so would be steep payments. Additionally the max you could take would be 50% of vested balance up to 50k. Pyaments would be about $1065/month.

If you were to decide after taking the loan that the payments were too steep you could notify your payroll dept to stop taking the loan payments from your check (written notification) and then at the end of the quarter following the quarter that you provide notification the loan would go into default and it would be taxable. You'd owe the tax (based on your personal tax rate) and 10% penalty...

steep price to pay...but the way to go if you absolutely need the $$ and are sure that the profits you make would support that extra tax, extra penalty, and expenses in the renovation process.

Careful though once you do this you likely won't be allowed another loan from your employer again.

What you use the money on is irrelevent..even though it's reinvested in the homes it's still a distribution and still a taxable even and subject to that penalty.