Trenton, NJ · Member since 2017 · 41 posts · 23 votes
FB Family! Question - does anyone know of lenders that would provide a HELOC to a rental that I own free & clear in my Solo 401k? Always appreciate the help - thank you!
The way that we have done more of a "HELOC" type loan for properties in our SOLO401Ks (very similar to SDIRA) is to use a "Private Lender" (a family friend who has lent to us short term on non retirement properties also) who was happy to do a 'First Position Mortgage' on properties that we owned free and clear.
It was very simple, we just used a local lawyer that drafted the mortgage with the proper 'non-recourse' language in it. The last one we did was a 5 year Note @ 5% and 75% LTV. We used those funds as a down payment on another property.
We are using ALL of the cash flow from BOTH properties to pay the Note back in that short time frame, after which we will once again be 'free and clear' on the 1st property, and have none of our own funds into the second one.
Since the property is in your Solo 401k, your Solo 401k could potentially receive a non-recourse loan based on the value and performance of the property. This could allow your Solo 401k to purchase additional assets for investment. Note that you could not receive the loan personally since the Solo 401k owns the property. There are quite a few lenders who specialize in non-recourse loans. With this loan product, you will not sign a personal guarantee on the loan to the Solo 401k. Doing so would be prohibited since you are a disqualified person. Here are a few non-recourse lenders to get you started:
No, you can not get a line of credit secured by the property owned by your Solo 401k, but like Justin elaborated you can do a cash-out refinance and pull the equity out so you can reinvest it. Here is a list of lenders offering non-recourse financing to retirement accounts (none of them will do a HELOC btw):
@Justin Windham - This is very helpful. I definitely understand there cannot be any commingling of funds but if there’s a way I can draw equity out an existing rental, I’m definitely to check up on these lenders. Thank you big time!
@Dmitriy Fomichenko - Dmitriy - Thank you for your clarification and sending the link to different lenders. Definitely going to take a look. Much appreciate your help!!
The way that we have done more of a "HELOC" type loan for properties in our SOLO401Ks (very similar to SDIRA) is to use a "Private Lender" (a family friend who has lent to us short term on non retirement properties also) who was happy to do a 'First Position Mortgage' on properties that we owned free and clear.
It was very simple, we just used a local lawyer that drafted the mortgage with the proper 'non-recourse' language in it. The last one we did was a 5 year Note @ 5% and 75% LTV. We used those funds as a down payment on another property.
We are using ALL of the cash flow from BOTH properties to pay the Note back in that short time frame, after which we will once again be 'free and clear' on the 1st property, and have none of our own funds into the second one.