Self Directed IRA LLC/ Solo 401k for Real Estae investment

25 Replies

Hello Folks,

I am trying to get some clarity on how to proceed with Self Directed IRA. I have a ROTH IRA at Vanguard and ROTH 401K at T Rowe. I like to combine these both into either a Self Directed IRA or Self Directed 401K? I plan to invest into Real Estate. Which companies are best when it comes to allowing Real Estate investments with Self Directed IRAs?



Chai, I have created a relationship with Scott Maurer at Advanta IRA. He is very good at what he does and always willing to go the extra mile for investors.

@Chai Jonn

Since you have both Roth IRA and Roth 401(k) funds, you may want to consider transferring the Roth 401(k) to the Roth IRA and then investing those Roth IRA funds in a single-member LLC.  


You can set us Solo 401K only if you are self employed or own a small business without full time employees.

Roth IRA can not be rolled over into Solo 401k, IRS does not allow that.

@Chai Jonn

You'll need a self-directed Roth IRA if you want to combine all of the funds. Although Roth 401ks can be transferred to Roth IRAs, Roth IRAs cannot be transferred to Roth 401ks. You'll need to pick a self-directed IRA custodian. You might want a facilitator to create an LLC if you'd like checkbook control of the IRA funds.

@George Blower George. Thanks for Info. My plan is to combine all into Self Directed IRA LLC or as opposed to just Self Directed IRA?

@Chai Jonn

No, every SDIRA does not come with CBC. Your SD IRA custodian will have to allow for a special purpose LLC to be funded by the IRA. It is typical to need a specialty facilitator to create such an LLC for the IRA custodian to approve the investment.

@Chai Jonn

The IRA LLC is useful for placing investments through the LLC, but it is not required from a creditor protection side for Colorado residents since IRAs are afforded full creditor protection in Colorado.

[Colo. Rev. Stat. Sec. 13-54-102(1)(S)]

@Chai Jonn , I've been researching the same. From what I understand, a Solo 401K has less risks than DSIRA. In the case of the latter, a single mismanagement can result in the dissolution of the IRA. Also the IRA is vulnerable to certain lawsuits where as the Solo 401K has better protection. There are also limits to how much you can borrow from one or the other as well as other nuances. I'd look in to the differences more carefully before combining them.

@Casey Sung

It's true, the Solo 401k does have a lot of benefits over an IRA. I'll include some below. Since @Chai Jonn has some Roth IRA funds, he'll need to go with a SDIRA if he wants just one structure. It may or may not be worth it to Chai to have both a Roth SDIRA and a Solo 401k for his other funds.

  • Compared to an IRA, Solo 401k contributions limits are roughly ten times higher.
  • There is no custodial requirement for the 401k.
  • You don't need the additional expense and administration of an LLC to have checkbook control.
  • There is a built in-Roth component whereas IRAs are either traditional or Roth, not both.
  • A spouse can also participate in the same Solo 401k plan.
  • The Solo 401k has additional tax benefits over an IRA when investing into real estate using leverage.
  • The penalties for prohibited transactions are less severe, though it's best not to utilize this benefit :)

talk to @Brian Eastman with he is the main man with SDIRA etc he has set up a lot of the big guys on BP and really is considered the go to professional. Just in random conversations when the topic comes up I am surprised how many people have used Mr. Eastman outside of the BP world. He gives free consultations. Well worth the time to talk to before you make any decision. 

@Chai Jonn I’ve been using for my self directed 401K. The folks that work there, are extremely knowledgable & responsive. I’ve successfully purchased 19 MF units through their guidance. Goodluck.
@George Blower So Roth IRA, into single-memeber LLC. Pay yourself out through the LLC, remaining funds back into Roth IRA? I’m trying to fully comprehend this myself. Thanks.

@Cristian Castillo

"Checkbook control" is a term used to describe the level of authority and control the 401k participant can have over the 401k assets. Since a participant can be the trustee of their own 401k plan, he or she can be the signatory on any accounts opened for the trust. This means that if a checking account is opened for the trust (as is pretty common among those wanting to invest the 401k into alternative assets such as real estate), the trustee will hold the checkbook to the account. Thus the term, "checkbook control." It is often used to distinguish between those accounts that are held with a custodian where the participant has no real authority to directly make transactions. Instead they would need to instruct the custodian to transact on their behalf. Checkbook control allows transactions to happen more quickly without the need for a middleman and this eliminates the transaction fees that custodians often charge.

@Ramsin Jacob

Because of the prohibited transaction rules, you are not allowed to pay yourself from the IRA-owned LLC. Investing the IRA LLC funds must be for the growth and benefit of the IRA. It is not an appropriate source of income for you personally. When you make investments outside of the IRA, the resulting income will be yours. IRA investments are to be considered completely separate from your own; the tradeoff is that the IRA offers tax benefits that allow the account to grow more quickly than it would otherwise.

@Daniel C.

The website for wealthflex indicates a pretty high annual fee for checkbook plans and they call it a "custodial fee." Do they serve as custodian or do you have checkbook control?

@Ramsin Jacob

Unfortunately you cannot pay yourself from the LLC because the LLC is for placing Roth IRA investments.

Thanks everyone for the information and advise. I opened a SDIRA LLC with I wanted both ROTH IRA and ROTH 401K into one single account , which I cannot go with 401k solo. So I went with SDIRA. Although, going forward, I am going to open SOLO 401K for my 1099 earned income

@Chai Jonn if you are eligible for a Solo 401k it would definitely be more beneficial for you. Just the contribution alone (which is 10X higher than an IRA) is worth it!

@Justin Windham

So it’s basically a checking account for the 401k.

So I'd have to set up an LLC to open this checkbook control option ?

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