Houston, TX · Member since 2015 · 38 posts · 1 vote
I am currently building a house on 5 acres. The five acres next to mine is currently up for sale. I know that there is someone else interested in it but I'd really like to buy it to keep from having a house right next door to mine. The only money I have available right now is in my solo 401k. My question is can I buy the property right next door to me with it. And if I do will I ever be able to use it for personal enjoyment. Is there a way for me to ever own it outright so that I can use it? Please help if you can. I think I can make my self a loan from the solo but how long can I make it for and can I make it with small payments?
You are a disqualified party to your Solo 401k. The 401k may not transact in any way that provides a direct or indirect benefit to you.
Simply "protecting" your property from development as you state could be viewed as a benefit to you. So right there, caution flags go up.
If you do choose to purchase the property with the Solo 401k, you cannot use the property personally in any way. Ever.
If the plan owned the property, you could choose to take the property out of the plan as a distribution in-kind. The current appraised market value of the property at the time of distribution would be taxable income to you. If you are under age 59 1/2 at the time of distribution a 10% penalty will apply in addition.
You can borrow the lesser of $50K or 50% of your Solo 401k value for up to 5 years.
based on what you described earlier you want to use your 401k money for personal benefit (perhaps indirect, but you would be benefiting from it personally). Your 401k should stay out of it...
thank you for the replies I guess I will have to find another way to purchase the property. If the loan was available for longer than five years I could swing it but I'll have to find another way rather than using the solo
You could purchase the property with solo 401k funds provided you have never owned it and later take it as in-kind distribution (pay federal and state taxes on the value of the property) if you want to have access to it.