Using Your 401(k) To Invest In International Real Estate

Using Your 401(k) to Invest in International Real Estate, with skyrocketing inflation and rising living costs, many people can no longer afford to retire at 60. Living out one’s golden years worry-free seems like an illusion for many, and forget about having Social Security care for you when you’re older. Living in countries like the US comes with a hefty price tag, and those unprepared are bound to suffer during retirement. 

Over 50% of Americans aged 55 to 64 cannot afford an emergency which costs them $2,000 USD. This worrying statistic reinforces why many people don’t feel secure enough to leave the workforce earlier. Do you think traditional retirement plans will help you live comfortably during your golden years? If so, think again.

While IRAs and 401(k) plans are popular long-term retirement plans among American employees, they might not be as profitable as they seem. Investing options are limited and bear low returns, and you are often confined to stocks, bonds, and mutual funds—intangible and highly volatile assets. Consider what has recently happened in stock markets worldwide. 

Wouldn't you rather invest in assets that outpace inflation and yield consistent returns? That’s exactly what real estate investing can offer. This market tends to increase in value over time and is worth more than the bond and global equity markets. 

This article will explore real estate investing, its benefits, and how you can use your 401(k) to invest in this profitable asset. 

THE FUNDAMENTALS OF REAL ESTATE AND ITS SIGNIFICANCE

Home ownership is a dream for many, and shelter will always be necessary. While most people want to own a place they can call home, others see real estate as a lucrative investment. As demand for housing grows and urbanization continues, buildings are going up worldwide, with most economic activity expected to happen in urban areas.

Real estate opportunities are abundant, and we're currently focused on exciting projects in South America that many of our clients are investing in. If you're used to considering real estate only in terms of your savings, it might surprise you to learn that your 401(k), when turned into a Self-Directed IRA, can also fund a property purchase. 

Real estate is one of the best assets for wealth protection, allowing you to tap into different property types, from beachfront apartments in Brazil to off-grid houses in the highlands of Panama. Options include investing in a beachfront apartment and renting it out during vacation, or investing in office buildings to offer companies and freelancers a workplace. There are numerous possibilities in real estate, but that’s not all. 

Real estate is also crucial in wealth creation and financial stability. While every investment carries risk, real estate stands out due to its tangible nature and potential for appreciation and income generation. For instance, many who bought houses a few decades ago have seen their net worth increase dramatically from their property. 

You may buy a house and use it as a vacation rental, only to sell it after a few years once its value has increased. Additionally, purchasing property in certain countries may make you eligible for a second residency or citizenship, helping you hit two targets with one single arrow. 

Real estate offers income, inflation protection, appreciation, and even second residences. A powerful, tangible asset to secure your future and diversify offshore

BENEFITS OF REAL ESTATE INVESTMENT

So far, we’ve seen practical examples of how real estate investment can help you generate income, but let’s dive deeper into the benefits you can receive from investing in this asset.

• Tangible Asset: Like gold and other precious metals, real estate is a physical asset. While stocks and bonds exist only as numbers on a screen, real estate provides a sense of ownership and control. Owning a short-term rental property in a tourist destination is excellent for generating cash flow, and renovations can increase its value over time.

• Appreciation Potential: Property prices typically increase over time, providing capital gains. Various factors, such as location, economic growth, and urban development, can drive this appreciation. For example, purchasing property in an up-and-coming neighbourhood or a country with a booming economy can substantially increase property value. While the value of stocks can change quickly depending on market sentiment, real estate’s growth tends to be more predictable. 

• Rental Income: Real estate can also offer steady rental income. Investing in properties with high rental yields is a smart way to grow your savings long-term. Instead of buying one house in the U.S., you could buy two apartments in a developing country and earn higher rental income. Short-term rentals in tourist hotspots can boost your income even further.

• Inflation Hedge: Real estate often rises in value in response to inflation, protecting against the eroding consequences of rising prices. As inflation rises, so do property values and rental income, allowing you to preserve your purchasing power. Unlike cash or bonds, whose value diminishes as prices rise, real estate often maintains or increases its value. 

• Second Residency or Citizenship Potential: In certain countries, investing in qualifying properties can grant you permanent residency or citizenship. For example, as of this writing (April 2025), Panama offers the Qualified Investors Visa, a special permanent residency permit in exchange for investing $300,000 USD in real estate. Similarly, countries like St. Kitts and Nevis and Dominica offer citizenship via investing in real estate. Note that the investment minimums may change over time, so it’s best to act promptly before you miss out on opportunities. 

HOW TO USE A 401(K) TO INVEST IN INTERNATIONAL REAL ESTATE

The benefits of real estate investing are massive, whether you want to rent, flip, or sell houses or other types of property. The question is, how can American employees invest in property through their 401(k)? 

The easiest and most straightforward way to invest in offshore real estate using retirement funds is by rolling over into a Self-Directed IRA (SDIRA). This option is available to most people and gives you access to a wider range of offshore investment opportunities, along with custodians who specialize in international deals.

Solo 401(k)s also allow real estate investments but are only available to self-employed individuals with no full-time employees (other than a spouse). While you can use a solo 401(k) to invest offshore, an SDIRA generally offers more flexibility and is a better fit for most investors. 

Conventional 401(k) plans tend to stick to the usual suspects—stocks, bonds, and mutual funds, but you’re ultimately betting everything on a rigged system. In today’s volatile world, they often fall short when it comes to protecting your wealth and preserving your lifestyle in retirement. That's why many of my clients adopt the strategy of investing in tangible assets, such as real estate.

Although you can’t invest in real estate with your current employer-sponsored 401(k) plan, this rule has some exceptions. Let’s explore these options to see if you can roll over your 401(k) into an SDIRA.

• Left Your Job?: If you’ve retired, quit, or been let go, you can usually roll over your old 401(k) into an SDIRA. This is one of the most common ways people explore more flexible investment options.

Here’s a thought: Have you forgotten about an old 401(k) from a previous job? It’s easy to lose track, but those funds might be sitting idle instead of being put to work in investments like offshore real estate. Take a moment to track them down—it could be worth it.

• Still Working? Check Out In-Service Rollovers: Did you know that, in some cases, you can roll over your 401(k) while still employed? Some plans allow employees aged 55–60 to move their funds into an SDIRA without leaving their jobs. Not all plans offer this, so check with your plan administrator to see if it’s an option for you.

• Rolled-In Funds: If you rolled over funds from an old 401(k) into your current employer’s plan, you can often roll those funds into an SDIRA. It’s a great way to regain flexibility, so consider this option.

• Surviving Spouses: As the surviving spouse of a deceased 401(k) account holder, you can transfer the funds into your retirement account or a Self-Directed IRA (SDIRA). This allows you to control the funds while preserving the tax advantages associated with retirement accounts.

Use your 401(k) to buy property abroad, gain income, protect wealth, and even secure a second residency. A smart path to diversify and build a resilient retirement plan

HOW TO SET UP AN SDIRA FOR REAL ESTATE INVESTMENTS   

First and foremost, to roll over your 401(k) plan into an SDIRA, you must find a custodian specializing in offshore investments. Our trusted partners are a sure bet, and they’ll gladly help you. 

Once you find your custodian, you’ll need to fund your new account. You may opt to roll over funds from your current plan or make a contribution. Make sure you stay compliant with IRS regulations at all times to avoid penalties or taxes. 

Lastly, your custodian should help you set up a Limited Liability Company (LLC) owned by your SDIRA to purchase offshore real estate without facing any regulatory restrictions. Since some countries don’t recognize American retirement accounts as the legal owner, setting up an LLC is the best route for a smooth offshore investment. 

CONCLUSION

Real estate investing through a 401(k) is an interesting avenue for Americans looking to diversify their retirement portfolio and protect their wealth. Unlike traditional assets such as stocks and bonds, real estate is a tangible asset that can appreciate over time, hedge against inflation, and generate consistent income. In times of economic fragility and stock market volatility, hard-money assets like real estate, precious metals, and land are superior to the assets which retirement plans typically offer. In particular, as a business owner or self-employed individual, you can tap into global real estate markets and enjoy the benefits of international diversification through a solo 401(k) plan. 

Whether you want a consistent income stream, to protect your wealth, or to explore new opportunities abroad, real estate can be a valuable addition to your financial plan. The possibilities are almost endless and go beyond mere economic reasons. In some cases, purchasing property abroad can also entitle you to a Plan-B residency or even citizenship, serving a dual purpose to benefit your future.