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Self-directed 401k FAQ – Can my solo 401k invest in real estate where I live?
QUESTION:
Can my solo 401k purchase my first home to live in & rent?
RESPONSE:
Good question as one of the top reasons that clients open Solo 401k accounts with us is the ability to invest in real estate.
When one makes a Solo 401k real estate investment, the real estate may not be used for personal use – even if part of the real estate will be used as a real estate investment.
While there are lenders that will lend to a Solo 401k to finance a Solo 401k real estate investment, these are specialty lenders as the loan must be a special type of loan: a non-recourse loan where the only recourse of the lender in the event of default is to foreclose on the real estate (i.e. no guaranty by the solo 401k owner/participant, etc.).
This means that one may not use an FHA loan (or a similar loan which is for residential loans) to finance a Solo 401k real estate investment.
