Investing in Real Estate with a Solo 401(k)

A Solo 401k which is also known as a self-employed 401k is generally set up by business owners who work for themselves without any employees, solopreneurs, and/or their spouse.

These types of 401k plans have the same rules and regs as any other 401k plan.

Solo 401k plans allow great flexibility with their investment options and you can choose to act as the plan trustee and invest in assets of your choice, including real estate.

The NASDAQ blog recently had a story outlining a lady in Mississippi who was using her solo 401k to invest in real estate and has been building up quite a portfolio of real estate assets.

Once her Solo 401(k) plan was set up, Susan started to invest immediately, taking advantage of the low home prices in her neighborhood. She purchased an investment property for $30,000 and turned it into a rental home, which she now rents for $850 per month.

Next, she bought a $16,000 home with cash from her Solo 401(k). She spent $4,000 to fix up the house and is now renting it for $700 per month.

These properties were purchased as direct investments through her Solo 401(k). That means that the houses are strictly investment properties that are rented out to her tenants and are owned by her retirement plan.

Susan must deposit all rental income she receives back into the plan, and use it to pay all of her rental expenses. Read the rest…

An advantage to using your solo 401k account to do real estate investing is that you can invest tax free and not have to pay taxes right away. This allows your retirement funds to grow tax-free!

Types of Real Estate Investments

Below is a partial list of domestic or foreign real estate-related investments that you can make with a Solo 401(k):

According to the IRA Financial Group, investing in Real Estate with a Solo 401(k) is Quick & Easyto set up.

Set-up a Solo 401(k) Plan with your financial advisor.

Identify the investment property.

Purchase the investment property with the Solo 401(k) Plan – no need to seek the consent of the custodian with a Solo 401(k) Plan since you serve as Trustee and Plan Administrator.

Title to the investment property and all transaction documents should be in the name of the Solo 401(k) Plan. Documents pertaining to the property investment must be signed by you as Trustee.

All expenses paid from the investment property go through the Solo 401(k) Plan. Likewise, all rental income checks must be deposited directly in to the Solo 401(k) Plan bank account. No 401(k) related investment checks should be deposited into your personal accounts.

All income or gains from the investment flow through to your 401(k) tax-free! Read more here…

Purchasing real estate with a Solo 401(k) Plan is essentially the same as purchasing real estate personally.

Here are some more investing examples from the IRS website.

However you decide to invest in real estate, just go out there and do it!

We are here to help with fast, 24 hour funding should you need it.

Mike Corgiat
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