Beacon, NY · Member since 2013 · 41 posts · 6 votes
Looking to open a solo 401k under my current Home Improvement business which is a LLC. Need checkbook control and ability to take loans. Any recommendations from those that currently have the same.
Self Directed IRA & 401k Advisor · Wenatchee, WA · Member since 2014 · 2k+ posts · 2k+ votes
11y
Steven,
Not exactly a recommendation - or a very biased one anyway. My firm implements and supports the Solo 401(k), and have done so since 2005. All of our advisors are seasoned real estate investors, and of course all plan legal work is done by our tax attorney with more than 20 years experience in this field. In addition to plan setup, we provide ongoing expert guidance. Please feel free to contact me.
Self Directed IRA & 401k Advisor · Wenatchee, WA · Member since 2014 · 2k+ posts · 2k+ votes
11y
Steven,
Not exactly a recommendation - or a very biased one anyway. My firm implements and supports the Solo 401(k), and have done so since 2005. All of our advisors are seasoned real estate investors, and of course all plan legal work is done by our tax attorney with more than 20 years experience in this field. In addition to plan setup, we provide ongoing expert guidance. Please feel free to contact me.
Birmingham, MI · Member since 2014 · 1 post · 4 votes
11y
Justin at Discount Solo 401K did a great job establishing solo 401k plans for my business partner and myself. Justin customized the plan to suit our needs. He was highly responsive to any questions or issues we had. He was available to assist us through the establishment of the 401k, the establishing of bank accounts, the transferring of funds from our IRAs and the signing of the loan documents. If you want to establish a high quality plan at a reasonable price I highly recommend Justin at DiscountSolo401K.com.
Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
11y
Just make sure when opening the solo 401k that you truly qualify as controlled group issues may come into play. If the business owner owns multiple businesses and any of those businesses have full-time employees, none of the businesses will qualify for a solo 401k. To learn more about the controlled group rules visit:
Rental Property Investor · Scottsdale, AZ · Member since 2010 · 390 posts · 599 votes
11y
Mark Nolan good to see you on biggerpockets! Mark handles my solo401k through mysolo401k.net. Mark is very accessible and I've had my setup for 2 years now and would highly recommend this company.
Investor · Downingtown, PA · Member since 2015 · 31 posts · 13 votes
11y
Mark or Serge,
I opened up a solo401k just last year...and I LOVE the flexibility! I am curious though...I have yet to purchase a property in the 401k...but if I do...will a bank place a mortgage on it? Or are there any considerations I should think about when purchasing and looking to re-fi and leverage the dollars into another project?
I ask because I swear I heard or read recently that the process or ability to obtain a loan on a property held in a solo401k may be different than personally held investment properties or even LLC or business owned properties. I've been looking around BiggerPockets blog a bit...but didn't see anything about the topic. Any insight?
you are correct, conventional financing is not allowed if you wish to use leverage for investment property inside of your Solo 401k. You have to use non-recourse loan.
There is only few lenders out there who do this kind of loans, feel free to PM me and I'll get you the list.
Investor/Syndicator · North Aurora, IL · Member since 2013 · 167 posts · 70 votes
10y
Wondering about realestate held inside a solo 401k. After you reach 59.5 can the asset be transfered from the 401k into your name? which would allow you more freedom with regards to use and disposition.
Wondering about realestate held inside a solo 401k. After you reach 59.5 can the asset be transfered from the 401k into your name? which would allow you more freedom with regards to use and disposition.
Yes, this would be a distribution from the 401k to yourself. You could distribute the asset in-kind rather than liquidating and distributing cash.
Investor/Syndicator · North Aurora, IL · Member since 2013 · 167 posts · 70 votes
10y
Thank you @Mark Nolan and @Justin Windham. It is truly a blessing to have such great resources here @BiggerPockets. What about offering a loan to an LLC (to purchase R.E.) that I am a member of from a 401k that I am the administrator for?
Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
10y
@Jim Biggs
That would be prohibited because it is your LLC and you are disqualified party with respect to the solo 401k rules. See following code section that discusses prohibited transactions.
What about offering a loan to an LLC (to purchase R.E.) that I am a member of from a 401k that I am the administrator for?
It's important to be clear about the parties and the activity between those parties in these scenarios. If you are asking about funding a loan from your Solo 401k (of which you are the participant) directly to your LLC (of which you are the member), then Mark is correct. That would be a prohibited transaction.
You could however, take a participant loan from the Solo 401k (up to $50k) and use those funds personally or in your LLC to purchase real estate. Participant loan funds are yours and are not subject to the prohibited transaction rules while you have them. You have up to 5 years to pay back the loan to the Solo 401k with payments at least quarterly and there are no taxes or penalties due for taking the loan.
Professional · Batavia, IL · Member since 2016 · 104 posts · 39 votes
9y
@Justin Windham I read that you can roll over an existing 401(k) from your W2 job. The question I have is do the investments that are in the job related 401(k) remain in those particular investment, equities for example, or are they "cashed out" when the roll over happens? Therefore the holder can use the cash for real estate. Or do the equities remain, and the holder can use any new cash they contribute for real estate?
The equity holdings can be transferred in-kind to the solo 401k. Therefore, you will want to make sure your solo 401k provider assists in opening a brokerage account with checkbook control at a brokerage firm like Fidelity Investments since the bank account can't hold stock and mutual funds, as a bank account is not a brokerage account.
Seattle, WA · Member since 2016 · 249 posts · 54 votes
9y
I was in the same boat as you in November 2016 last year. I finally decide with E-Trade because of one reason, they allow loans on the account anytime with interest around 5% paid back into retirement.
You can only invest in stocks/ETFs/etc, not real estate. But I want some diversity in my overall investment strategy so it works for me.
As Mark mentioned, you can do an in-kind transfer if you wish to keep the same assets. If you do not want to keep the same assets, then they can be liquidated before the transfer. Many will do the latter if they are looking to invest into real estate or other alternative assets.
One thing I will mention is that previous employer 401k plans can be transferred over, but if your funds are with a current employer, their 401k plan most likely won't allow you to transfer the funds yet. You can check to see if they allow for in-service distributions which could allow you to access a portion of the funds while working, but most traditional plans don't provide for that.
Professional · Batavia, IL · Member since 2016 · 104 posts · 39 votes
9y
Thank you @Justin Windham! You actually answered my next question at the same time regarding if a current employer would allow contributions to the Solo. So in your (and @Mark Nolan) experience, do most of your clients stop contributing to their current employers plan, and just continue to the Solo plan - while they have their W2 job? Is it legally possible to contribute to both?
Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
9y
@Richard Anderson
Unfortunately, you can only contribute to the solo 401k based on net earned income generated through the self-employed business sponsoring the solo 401k plan. In other words, you can not contribute to the solo 401k plan based on your W-2 wages from your day job.