Purchase a building with self-directed 401k | non-recourse loan 401k| Office Space

QUESTION: Can my self-directed 401k purchase a building for investment and can it borrow some of the funds for purchase.  Is there any conflict if I lease part or all of the building from the self-directed 401k trust.

Thanks,

Josh P. in TX

ANSWER: While the self-directed 401k can purchase a building as an investment since it is not listed as a disallowed investment under the 408(m) regulations, if debt financing is incorporated the loan would have to be in the form of a non-recourse loan to the self-directed 401k. Therefore, because the loan would be to the self-directed 401k, 401k funds would have to be used to make the non-recourse loan payments, and, in the event of default, the borrower’s only recourse would be against the real estate property owned by the self-directed 401k not any other assets of the 401k or the trustee’s personal assets. To learn more about the non-recourse loan arrangement, visit following link: https://www.mysolo401k.net/Blog-for-MySolo401k.html?entry=quick-and-precise-explanation-of

With respect to leasing part of the building from the self-directed 401k trust, the lease would have to be to the self-employed business sponsoring the self-directed 401k and not for your personal use, but rather business usage. Please click here to read our blog surrounding office space exemption and for applicable code sections.

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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