Solo 401k Daily Question: How to use Solo 401k funds as a down payment to buy real estate investment?

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SOLO 401K QUESTION: Can I use a Solo 401k loan as a down payment to buy real estate in my own name? 

Great question!

Yes – subject to the Solo 401k loan rules (e.g. loan may not exceed lesser of 50% of balance or $50k, etc.).

You can use those proceeds for whatever purpose the solo 401k owner wants but in this case, the person is not investing their solo 401(k) money into real estate directly (which you can do with our plan).

For example, here the solo 401k owner may be looking to buy a rental property in their own name (or perhaps under an LLC that such person owns personally).

Effectively, the Solo 401k owner is looking to use their solo 401(k) like a bank.

In this case, since the solo 401k owner is not buying the solo 401k in the name of the plan, the Solo 401k real estate investment rules don’t apply which means that the solo 401k owner may use the property for personal use (e.g. live in it) and/or work on the property.

It is important to remember that the solo 401k loan must be paid back according to the payment and the obligation to pay back the solo 401k loan is independent of the performance of what the proceeds of the solo 401k loan is used for (e.g. if the tenants are not paying the rent on the property the loan still must be paid back per the repayment schedule).

About George Blower

I have the privilege of educating our clients about our products and services so that they can make informed and confident decisions about their financial future. Prior to joining My Solo 401k Financial, I served as the general counsel for a subsidiary of a Fortune 500 financial services company. Learn more about George Blower and My Solo 401k Financial >>

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