Selling in a Solo 401K with seller (me) 2nd mortgage.

[Mark Spritz]

I have a property that I am selling and have a buyer that requires a 2nd mortgage and that it is from me the seller and at 0%. The buyer needs that to be able to purchase the property at 75% LTV from the bank. So let's say it is 20K 2nd mortgage over 10 years. but at 0% because if the second had interest then it would allow the bank to be at 75% and do the first loan. Now this 20K is actually above the price I was willing to sell the property anyway.

1) Can I have that second done in my Solo 401K and still be in compliance?

2) After closing, is it possible to sell the note such that I sell it for less, but at least I don't have to manage the loan for 10 years?

3) Do you think I should just not do the deal because of the 2nd mortgage?

[Dmitriy Fomichenko]

@Mark Spritz

If you own the property personally your Solo 401k can not be involved in the transaction in any way, that would be considered a "prohibited transaction". If you are selling the property owned by the 401k then the 401k can carry a 2nd. The terms must be in line with the market and must benefit the 401k.