Investing in real estate can be a great way to build wealth and diversify your portfolio. But what if you don’t have the funds to get started? The good news is that you may already have a powerful tool at your disposal: your 401(k) retirement savings plan. With a self-directed 401(k), you have the flexibility to invest in a variety of assets, including real estate. In this step-by-step guide, we’ll explain how to leverage your 401(k) for real estate investment.

Step 1: Understand Your 401(k) Plan Before you can start investing your 401(k) in real estate, you need to understand the rules and regulations of your plan. Your employer may offer a traditional 401(k) or a Roth 401(k), and there may be restrictions on what you can invest in. You’ll also need to know the maximum amount you can contribute each year.

Step 2: Choose a Self-Directed 401(k) Provider Not all 401(k) providers offer self-directed plans, so you’ll need to find a provider that does. Look for a provider that offers low fees and a wide range of investment options. Some popular providers include Vanguard, Fidelity, and Charles Schwab.

Step 3: Roll Over Your Existing 401(k) or IRA If you already have a 401(k) or individual retirement account (IRA), you can roll over the funds into your new self-directed 401(k) plan. This will give you more control over your retirement savings and allow you to invest in real estate.

Step 4: Open a Real Estate Investment Account Once you have a self-directed 401(k) plan in place, you’ll need to open a real estate investment account. This account will allow you to make direct investments in real estate, such as buying rental properties or investing in real estate investment trusts (REITs).

Step 5: Find a Custodian To comply with IRS regulations, you’ll need to have a custodian for your real estate investment account. The custodian will hold the assets on behalf of your 401(k) plan and handle the paperwork and transactions.

Step 6: Do Your Due Diligence Before investing your 401(k) in real estate, it’s important to do your due diligence. Research potential properties or REITs, and make sure you understand the potential risks and returns. You may want to work with a real estate agent or financial advisor to help you make informed decisions.

Step 7: Make Your Investment Once you’ve found a real estate investment that meets your criteria, you can make your investment using your real estate investment account. Your custodian will handle the paperwork and ensure that the investment complies with IRS regulations.

Conclusion: Investing in real estate can be a smart way to build wealth and diversify your portfolio, and leveraging your 401(k) retirement savings plan can be a powerful tool to help you get started. By following these seven steps, you can set up a self-directed 401(k) plan and start investing in real estate today. Just be sure to do your due diligence and work with a trusted advisor to help you make informed decisions.