The sheer volume of real estate financing options made available to today’s investors is staggering. Whether you realize it or not, there are countless opportunities to land the funds for your next deal — if you know where to look, that is. Hard money lenders — and even private money lenders, for that matter — are practically “champing at the bit” to get their capital in the hands of savvy investors they know are going to get the job done. What’s more, traditional lending institutions offer a myriad of loan options for all sorts of properties. Case in point: there are plenty of real estate financing options out there if you play your cards right.

It’s worth noting, however, that not all real estate financing options are so obvious. In fact, there is one creative real estate financing vehicle that most investors already have access to: a 401(k) retirement plan. That’s right, the very same retirement account you have been paying into for the better part of your professional career can act as a great vehicle to fund your next real estate investment. In other words, if you have a 401(k), you may have already found the creative real estate financing to fund your next deal.

REAL ESTATE FINANCING OPTIONS FOR NEW INVESTORS

Today’s 401(k)s are much more versatile than people give them credit for, even those with retirement accounts that are exceeding expectations. In fact, 401(k) retirement plans don’t have to be relegated solely to defined contribution plans. It’s entirely possible to self-direct your own 401(k) plan into an entirely different investing vehicle. And while there are certainly limitations on where you can self-direct the money you have in your 401(k), the Internal Revenue Code doesn’t state what a retirement plan can invest in, but rather what it cannot.

It just so happens that real estate is one of the investment vehicles those with 401(k)s can divert their savings to. According to Forbes, “what many retirement account investors are not aware of is that hidden in the tax code is a noteworthy provision that allows a 401(k) plan to purchase real estate with leverage without triggering a tax.”

Therein lies the greatest benefit of a 401(k), in my opinion: the ability to invest in real estate with the money you have accumulated in your retirement account, but I digress. The best retirement strategies are those that focus on diversification. So while I am a huge proponent of self-directing your 401(k) into real estate, It’s also smart to continue making contributions to it. If for nothing else, 401(k) have become ubiquitous with their own impressive advantages.

As perhaps America’s most popular retirement vehicle, 401(k)s have become synonymous with three significant benefits: tax breaks, automatic savings, and matching contribution programs.

First of all, and perhaps the most underrated benefit of investing in a 401(k), is the significant tax shelter these retirement vehicles offer. The funds deducted from each paycheck and “dogeared” for your 401(k) aren’t taxed like regular income. In fact, they aren’t taxed at all — so long as you leave them in the account until you are eligible for retirement. As a result, your income taxes won’t include the amount you contribute to your 401(k), which means your contributions effectively lower the amount of income you are taxed on come April. Simply by contributing to a 401(k), investors may reduce the amount they owe each year in income tax while simultaneously growing their next egg.

In addition to the tax shelter, 401(k)s have an added bonus that very few retirement plans can compete with: matching contribution. What’s that, you ask? It’s free money. You see, as a defined contribution plan, 401(k)s are supplemented by the money you make working at a specific job; you may elect to have a percentage of your paycheck be put towards your retirement plan. And since defined contribution plans are typically sponsored by your employer, it’s not uncommon for them to make contributions of their own. Lots of companies, especially bigger ones, will offer their employees a matching plan. As their names suggest, matching plans will witness employers “match” their employees’ contributions to their 401(k)s.

“The match can often be 50 cents to a dollar for every dollar you contribute, up to a set maximum – perhaps 3% to 6% of your salary, or in some cases a dollar limit,” according to CNN Money. Again, the money your employer matches is free; they are essentially contributing to your own retirement plan out of their pocket. What’s more, even the money your company matches won’t increase your tax liabilities. “You pay no taxes on matching contributions until you withdraw them in retirement,” says the CNN article.

If that wasn’t enough to convince you of the benefits of a 401(k), these retirement vehicles act as an automatic savings plan. Since funds are automatically withdrawn from your paycheck each payday, contributions become habitual and reoccurring. That means you will inevitably build a next egg from saving alone. And studies have shown just how effective automatic savings plans can be, so don’t underestimate this forgotten benefit.

There’s no doubt about it: 401(k)s are incredibly beneficial to those that invest in them wisely, but they are far from the only strategy you need to consider. I want to make it abundantly clear, I am a huge proponent of 401(k)s and what they can do for your retirement efforts, but I personally don’t believe a 401(k) should be your only stream of retirement income.

An eye-opening collection of retirement data on the Motley Fool concurs with my sentiment. “According to Fidelity Investments, which administers retirement accounts for many millions of Americans, the average 401(k) balance as of mid-2017 was $97,700, while the average IRA account balance climbed into six figures at $100,200.”

Now, that may sound like a lot, but it’s far from it. In fact, at just under $100,000, the average American’s 401(k) is grossly undervalued. In fact, data presented by the Motley Fool suggests the average person needs somewhere in the neighborhood of $930,600 and $1.3 million. That’s a far cry from where many people need to be to retire comfortably.

While retirement accounts with roughly $100,000 in them are far from what one needs to retire comfortably, they are more than enough to supplement your first few real estate deals. That said, it’s something many people need to consider, at least if they intend to retire comfortably. You see, investing in real estate to supplement your golden years can be a great move. Data presented by Attom Data Solutions suggests as much.

According to the company owned by RealtyTrac, homes flipped in the first quarter of this year “were sold for a median price of $200,000, a gross flipping profit of $64,284 above the median purchase price of $135,716, up from a gross flipping profit of $63,500 in the previous quarter and a gross flipping profit of $59,100 in Q1 2016 — a new all-time high going back to Q1 2000, as far back as the data is available.”

“The $64,284 average gross flipping profit translated into an average 47.4 percent gross return on investment (ROI) for homes flipped in Q1 2017,” the report went on to say.

Conversely, the 47.4 percent return real estate investors saw, on average, in the first quarter of this year is well above what one could expect to make through a traditional 401(k). In fact, Investopedia suggests that, while returns on 401(k)s can vary dramatically, they “can provide an average annual return ranging from 5% to 8%.” That’s considerably less than one could expect to earn in a smart real estate investment.

I do, however, maintain that 401(k)s are a sound investment strategy; they just shouldn’t be your only one. Instead of ignoring one of the best real estate financing options made available to today’s investors, consider self-directing your own 401(k) to take advantage of today’s hot real estate market.