Questions about investing in RE With a Solo 401k Plan

July 13, 2018 | By Mark Nolan

QUESTIONS:

Hi –

I was looking at self directed retirements plans & reviewing your plans.

Q 1: I am curious can a solo 401k be my lender on an investment property, allowing me to pay the interest to my 401k?

Q 2: Or can they come in after i have bought to find the mortgaged portion … like in the TIC situation you described?

Q 3: Or is this really more useful fir any future properties i buy?

I’m future properties, if i don’t have enough funds to purchase in cash as me or in the Solo… and i buy with personal funds & the 401k funds in a TIC, can my portion be via a third party loan or does the cash/loan purchase have to be only with the non recourse loan to the Solo.

Q 4: How difficult is it to find a non-recourse loan? Seems like banks would be hesitant.

Just trying to figure out how to best use my 401 in real estate, knowing it likely doesn’t have enough to fully own & fund a property on its own.

Thanks!

Laura

ANSWERS:

First, in order to open a solo 401k plan you must be self-employed. Click here to learn about the solo 401k eligibility requirements.

ANSWER TO Q 1:

You can take a solo 401k participant loan up to the limits and use the funds for any purpose including investing in real estate.

ANSWER TO Q 2:

Once you borrow from the solo 401k plan, you can use those funds for any purpose because they are no longer deemed solo 401k funds.

ANSWER TO Q 3:

You can use the borrowed funds now or later. From a solo 401k loan perspective what matters is that you pay the solo 401k loan back pursuant to the rules.