Invest self-directed 401k in multifamily apartments | Management Fees

BACKGROUND: I am looking to use self-directed 401k funds to purchase multifamily apts. I will also require financing.

As part of the deal I would also earn a management fee based on the cost of building.

QUESTION: Are there any conflicts with this arrangement in terms of me getting the fee now?  I want to avoid penalty withdrawal taxes and be able to take the fee.


Linda in New York

ANSWER:  The solo 401k owner may not receive compensation as a result of his or her 401k investment in the property, whether multifamily apartments or office buildings. Reason being, the solo 401k owner is deemed a disqualified party and thus may not personally benefit as a result of a solo 401k investment. By receiving management fees from the asset of the solo 401k (in this case the office building or multifamily apartment buildings), you would be personally benefiting and it would violate the following specific prohibited transaction rule.

  • The receipt of consideration by a fiduciary for his or her own account from any party dealing with the Solo 401k plan in a transaction that involves Solo 401k plan income or assets.

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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