Solo 401k for Self Employed: What makes it perfect for real estate?

“The major fortunes in America have been made in land.”

~ John D. Rockefeller

The real estate industry has enticed generations of young and enthusiastic individuals to choose a career in it and build fortunes. In one way or another, people have always invested in different types of properties including commercial properties, residential properties, and rental properties. In fact, real estate professionals often buy rental properties to support themselves during retirement. There are some retirement plans that offer real estate investments but none has surpassed Solo 401k for self employed.

It is one of the very few retirement plans that go beyond the conventional REIT (Real Estate Investment Trust) investments and allows physical property investments.

5 Reasons to Choose Solo 401k for Real Estate Investments

Higher contribution limits: Solo 401k for self employed allows annual contributions of up to $52,000 in 2014 and $53,000 in 2015. Real estate often involves large transactions, requiring substantial amounts of funding. With a Solo 401k retirement plan, a couple could save in excess of $100,000 annually with spouse contributions and use these funds for real estate investing.

Flexible investment options: Solo 401k is among one of the very few retirement plans that offer flexible investment choices. One could invest in commercial properties, residential properties, limited liability companies (LLCs), private partnerships, publicly traded stocks, tax sale certificates, equipment leasing and similar investment options.

Non-recourse loan for funding: As mentioned earlier, real estate transactions are expensive, one might require funding to sponsor real estate purchases. Solo 401k retirement plans allow funding through non-recourse loans. A non-recourse loan serves as an additional protection for the Solo 401k owner because the lenders cannot come after the owner in case of a default.

Tax-free capital gains: Any capital gains earned via house flipping under a Solo 401k plan are liable to taxes only at the time of withdrawal. Not only capital gains but also rental income realized through a Solo 401k owned property is taxable only upon withdrawal. It means that Solo 401k investments can grow tax-free and offer tremendous returns over longer durations.

Checkbook Control: Solo 401k plans offer checkbook control, which makes investing more convenient. Further, account holders will save crucial time, which is otherwise wasted in receiving custodian consent. The agility of Solo 401k retirement plan is crucial for real estate success.

Any real estate professional looking for safe retirement investments could choose Solo 401k and add an extra level of protection to his/her retirement savings.