Solo 401k for Business Owners: Best time to Invest in Real Estate

Are you a small business owner planning to invest in real estate? According to the national average mortgage rate finder at Bankrate.com, a 30-year fixed rate mortgage loan for $200,000 is available at an interest rate of 3.79 percent to 3.82 percent. Mortgage interest rates have remained historically low in the last three years starting in 2012. This could be the best time to invest in real estate with the Solo 401k for business owners.

The trend is catching on as a recent survey from the Mortgage Bankers Association showed that the number of mortgage applications rose 9.5 percent in the week ending on March 20, 2015 as compared to its previous week. At the same time, the 30-year fixed rate mortgage interest rates were at 3.90 percent for mortgages with conforming loan balances ($417,000 or less).

For real estate professionals, investing in real estate for retirement can be a promising prospect. The Solo 401k for small business owners is a retirement plan that offers multiple investment options, including real estate. If you are working alone with no full-time employees, you are qualified for this investment plan.

The Solo 401k retirement plan offers higher contribution limits of up to $53,000 in 2015, along with a catch-up contribution of $6,000 for plan participants over 50 years old. These high contribution limits allow individuals to save money for properties and other indirect real estate investments. In addition to it, the Solo 401k plans allow funding through non-recourse loans tax-free. These loans are available without any personal collateral, which help the plan avoid the possibilities of engaging in a prohibited transaction.

Another important benefit of using the Solo 401k for business owners to invest in real estate is the ease of control. You can opt for the checkbook control feature and make investments at your discretion. It will allow you to make quick decisions and reduce paperwork.

You can start by opening a Solo 401k account and rollover your existing IRA or old 401k funds. After funding your Solo 401k, you can find a suitable property and assess your financial condition. In case you are short on funds, apply for a non-recourse loan and use these funds to purchase the property.

You should be aware of some important requirements. For example, your Solo 401k plan is the owner of the property. Any maintenance costs associated with the property should come out of your Solo 401k account only. Conventional loans are not allowed in these types of investments. Further, you cannot enter into a deal with a disqualified person or entity.