QUESTION 1: I have read conflicting information on doing a real-estate transaction using the solo 401k partnered with myself. How is this not a prohibited transaction? con investing
ANSWER: Please click here to visit the DOL opinion letter 20001-10A, which cover the co-investment rules.
QUESTION 2: What steps need to be done to ensure it is OK?
ANSWER: Please visit link reference above and also visit tenants in common to learn more.
QUESTION 3: Once funds are rolled into the Trust’s bank account from the SEP, are there any restrictions or special accounting (with more than one bank account in the trust names), when moving funds between accounts?
ANSWER: If both spouses are contributing to the solo 401k, it is best to open separate bank accounts, one for each solo 401k participant. This will help ensure accurate and appropriate accounting of each solo 401k participant’s account. Further, the flow of the investment purchases, gains to expenses should be divided between both solo 401k participant’s respective accounts and based on the amount invested. What’s more, if Roth amounts come into play, each solo 401k participants Roth contributions and/or in plan conversions would need to be separately account for by opening additional bank accounts and designating them as Roth Designated Accounts.
QUESTION 4: How should fees, like notary, the establishment of the trust, and check orders be paid? Does it make a difference if these fees were incurred prior to the account being opened?
ANSWER: Please click here to learn about which fees must be paid with solo 401k funds and which can be paid with personal or business funds.
QUESTION 5: Do you have some general operating instructions with do’s and don’ts?
ANWER: Yes please visit self-directed 401k checkbook control do’s and don’ts. Further, please visit our website as we have published over 1,000 pages on the solo 401k subject and continue to add to it every day. Lastly, please feel free to call or e-mail us anytime to discuss solo 401k compliance questions.
TI C Summary
1) One “cannot” combine Personal funds and 401K funds into a Real Estate investment if there is any loan involved in the transaction.
2) One “can” combine Personal funds and 401K funds into a Real Estate investment if it is an all “cash” transaction, i.e. no loan involved.
3) One can invest their solo-401K funds with “another” investor and get a loan from a bank, provided the other investor is not the solo 401k participant, his or her spouse, children, and grand parents to name a few. For a list of disqualified parties, CLICK HERE.
Solo 401k and Personal Funds QUESTION:
It is possible for real estate to be purchased using non-retirement funds (i.e. personal funds) as well as funds from your Solo 401k via a “Tenancy in Common” transaction?