QUESTION: I am interested in buying a condo in Florida using my self-directed solo 401k as a vacation rental and long term hold – I would not be using it as I understand the laws. I would be buying directly from the owner – through an escrow of course. Could you please explain the process and formwork I need. Thank you in advance.
TJ from New York
ANSWER: Provided the third party that your solo 401k plan would be buying the Florida condo from is not a solo 401k disqualified person: You, your father or mother, son or daughter, your solo 401k provider, for example, real estate is an allowable solo 401k investment. Visit Solo 401k disqualified persons to learn more about disqualified parties.
The steps of investing a solo 401k in real estate entail the following:
– Draft the purchase documents with help from the title company
– Reflect the solo 401k plan as the buyer in the all the purchase documents
– Have the property deed recorded in the name of the solo 401k
– Fund the escrow and final purchase with funds from the solo 401k bank account
– After the transaction closes, as trustee of the solo 401k you will safe keep the documents in connection with the Florida condo purchase.
Lastly, all future expenses generated from the solo 401k owned condo will need to flow to the Solo 401k bank account.