Solo 401k IRA

[Timothy Parish]

In 2015, my sister had a business which was essentially her livelihood. She approached me an indicated her landlord was selling the building and would I be interested. I always was intrigued about real estate, so I purchased the building for $65,000. I took $97,000 from my 401K at work. I opened an account, a Solo 401K IRA and completed the transaction. Then the pandemic hit, and I got a loan to sustain the basis business needs. The property is a historic property but since I purchased the property inside an IRA, it doesn't qualify for tax credits to rehab it. I currently don't have the financial ability to invest additional funds into it. The building is now vacant in the bottom portion including by sister's business. The tenant was unable to fulfill their obligations. The top portion needs work. There are so many IRS restrictions and prohibited transactions within a Solo 401K that it makes it difficult to navigate. My question is should I just sell the building and let the funds go back into the IRA? I got it appraised in 2022 and it's valued at $165,000. From what I have gathered, I should have just started an LLC and purchased the property. Mistakes made – Lesson – Learned. Any feedback is welcome.