Questions: IRA LLC | Solo 401k | Foreign Real Estate

I have a few questions about the solo 401k program. I am 55 and retired last year.


QUESTION 1:  Can I use the solo 401k to buy foreign real estate? The purchase would be for rental property. The purchase would become my business. Is there a type of “proof of existence” I could get with an apostille if needed? It would be needed to satisfy a registering requirement for me in Uruguay where the property is located.


ANSWER: Yes the solo 401k rules permit investing in real estate, both foreign and domestic; however, you don’t appear to qualify to open a solo 401k because you are not self-employed. What’s more, you cannot treat assets owned by the solo 401k (in your case foreign real estate) for self-employment income purposes for two main reasons: one the solo 401k owned real estate would not fall under earned income but rather passive income because income generated by an asset of a solo 401k is treated as passive income; two you cannot have personal use of real estate owned by a solo 401k; therefore, you cannot treat the real estate asset as a self-employed business or earned income.


QUESTION 2: Otherwise would a IRALLC be my best option?


ANSWER:  Yes the IRA LLC may be your only option if you are looking to use retirement funds to invest in foreign real estate. You could transfer other retirement funds into a self-directed IRA and then have the IRA invest in an IRA LLC that would be managed by you and thus invested in foreign real estate. The foreign property would be owned by the IRA LLC, so all expenses associated with the foreign real estate would have to be paid with funds from the IRA owned LLC and income generated from the foreign real estate would flow back to the IRA owned LLC as well.


Thank you


DJ in New York

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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