Fix or Repair Solo 401k Real Estate | Prohibited Transaction

Hello we have a question:

QUESTION: If we decided to purchase a rental property and fix it and the sell it, can we fix it with the Solo 401k money?
Thanks! LC

ANSWER:  Good question. Because the rental property is an asset of the Solo 401k, any expense associated with the rental property including improvements are required to be paid with Solo 401k funds.  If you were to use personal funds or outside funds, it would be considered a solo 401k prohibited transaction.

What’s more, since you are the Solo 401k trustee/participant, you cannot improve the rental property because you are considered a disqualified person for Solo 401k investment purposes; therefore, you will need to hire an outside party not considered a Solo 401k disqualified person to perform the real estate improvements/repairs.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>