Rental Property Investor · Glendale, AZ · Member since 2014 · 38 posts · 17 votes
Hi BP,
I created a Solo 401K a year and a half ago and bought an 8 unit property with it.
The returns are good but I am looking to fund other Real Estate deals through my Solo 401K for 6-12 months.
Also potentially looking to borrow from other peoples Solo 401K/IRA in order to use as downpayment or purchase other properties.
Has anyone experience doing this?
Any advice would be great.
Thanks!
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
8y
Chad,
Solo 401k is a great vehicle to build wealth for retirement. Assuming that your plan is 'self-directed' you have the freedom to invest in any alternative assets including real estate, trust deeds, and more...
You can use leverage in your Solo 401k to buy more properties, but since you are not allowed to provide a personal guarantee the loan must be non-recourse. While you can borrow from any private lender including retirement accounts, you probably will get better terms from a lender specializing in these types of loans. Here is a list of lenders that you may find helpful:
Congrats on your Solo 401k investing so far. Many investors seek outside financing, but as other contributors have mentioned, loans to your Solo 401k must be non-recourse.
BP is a good place to network to find private lenders and there are lenders that specialize in these loan types. The rates can vary depending on the lender and specifics of the property. You may want to reach out to a few lenders to get a feel for what is generally involved.
Rental Property Investor · Glendale, AZ · Member since 2014 · 38 posts · 17 votes
8y
Just wondering if it is ok to trade with other solo 401K investors where they would help with deposit for my investment properties so I can take out a loan and get the benefits of the tax benefits of owning properties? and I can invest my Solo 401k to help invest in their properties?
Retirement Accounts Attorney · Southfield, MI · Member since 2017 · 3k+ posts · 1k+ votes
8y
@Chad Canales
You appear to be referring to promissory note investments.
That is an interesting one because you have to be careful not to be loaning (promissory note) your solo 401(k) funds to a third party even if they are not consider a disqualified party and then they turn around and loan you money. You would want to make sure that both parties can demonstrate that both investments were not contingent on each other going into such transactions.
Yes, you can do as described. Just keep in mind the prohibited transaction rules. George made a good point too. In following the PT rules, you do want to make sure that any single transaction is not part of a larger scheme to benefit disqualified persons or otherwise circumvent the rules.