QUESTION 1: Once I set up this self-directed 401k can I (acting as the Trustee for the self-directed 401k plan) purchase a rental property (single-family home or condo/townhome), or other types of real estate with the money in this plan?
ANSWER: Yes the self-directed 401k rules permit real estate such as rental properties as an investment, provided the self-directed 401k prohibited transaction rules are adhered. Further, the IRS has published language on their website confirming the business owner can serve as trustee of his or her self-directed 401k.
QUESTION 2: And then can my daughter be an occupant of this property as one of the tenants?
ANSWER: No real estate held in a self-directed 401k cannot be occupied by the self-directed 401k owner’s daughter because daughters fall under the self-directed 401k disqualified party list.
The following also may not rent/occupy property owned by the self-directed 401k:
The self-directed 401k owner/trustee
The self-directed 401k owner’s/trustee’s spouse, son, parents, grandparents and the self-directed 401k provider.
QUESTION 3: Would I have to charge here rent? Or could I charge here a minimal amount since I may have other paying tenants?
ANSWER: Whether a daughter of the self-directed 401k owner’s real estate owned property pays rent or not does not come into play because a daughter falls under the self-directed 401k disqualified party list.
Thanks again for all your help,
Susan in in Colorado
