General Information: Investing a Solo 401k in Real Estate

Information Regarding Investing a Solo 401k Plan in Real Estate: For more information please see the following link:

  • Non–recourse financing: Find lenders that specialize in non–recourse loans to solo 401k plans: CLICK HERE
  • Real Estate Investment Procedure: Click Here
  • Real Estate FAQs: Click Here
  • Invest in Real Estate: Click Here
  • Prohibited Transactions Self-Directed 401k Click Here

Single Member LLC for Solo 401k Investing: While not required for investing in alternative investments, the solo 401k plan can be invested in a single-member LLC. Click here to learn more.

Multiple LLCs: Click Here Webinar

Flipping Real Estate Inside a Solo 401k Plan: Flipping homes is generally considered a trade or business activity.  When a tax-exempt entity (e.g., Solo 401k or IRA LLC) engages in a trade or business on a regular or repeated basis, the income generated may be subject to Unrelated Business Income Tax (UBIT).   While the industry consensus is that 1-2 flips per year would not expose the income to UBIT, a higher volume of such activities increases that risk.

Airbnb Solo 401k Rental Income – UBIT Considerations:

With respect to a Solo 401k investment in real estate, UBIT could apply if the income generated is considered business rather than investment income. For example, with respect to income generated by a Solo 401k investment: income generated from fixing and flipping a higher volume of properties may be considered business income that is subject to UBIT whereas rental real estate income is generally considered passive investment income and not subject to UBIT.  One type of rental real estate income that may be considered business income, however, is the short-term rental income as described in the post that I shared below. Practically speaking, whether income is considered short-term will depend on the facts and circumstances (e.g. the average rental period, etc.). Click Here

If the Solo 401k wishes to lend funds to a non-disqualified party in the form of a Promissory Note, you as the Trustee of the plan create the promissory note which would list the loan/principal amount, interest rate, when the note is due (maturity date), and guidelines for dealing with possible loan default. Please see the following links below for helpful information regarding Promissory Note Investing:

Some of the criteria entail charging each person an interest rate that will benefit the solo 401k plan. A conservative approach would be to charge an interest rate based on each person’s credit score and a rate that a bank would charge each person.

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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 >>

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