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Self-Directed 401k – Can I sell my Solo 401k real estate to a Homeowners Association (HOA)?
QUESTION:
My SOLOK purchased 10 acres of land and I contracted and built a 3-lot subdivision. In the process, approximately 7 acres were designated as common land because it did not have any perk sites (i.e., septic systems would not work, therefore houses could not be built there). It was envisioned that as each lot sold, each owner would have an “undivided interest” in the 7 acres for recreation or whatever these three owners decided among themselves.
My question is, at this point, who should own the 7 acres? Should that be owned by the HOA such that eventually, when all three are sold, it all would no longer be part of the SOLOK? Or, should the SOLOK hold onto it until the last lot is sold, then create the HOA and transfer ownership? Or some other option?
RESPONSE:
An asset of the solo 401k can be sold to a third party, but the party cannot be a disqualified party such as a business that you or your certain relatives own, you or your certain relatives, for example. Therefore, if the solo-owned acres are sold, to the HOA at market value you cannot be an officer, owner or employee of the HOA. See more: https://www.mysolo401k.net/solo-401k/investments/
