Investing with Solo 401k and partner. How would financing work?

4 Replies

Thinking about partnering up with a friend and use the funds from my solo 401k for a buy and hold deal in a new LLC. How would the financing work since the funds are coming from solo 401k? I understand the financing in case of buying within the solo 401k only but unsure when a partner and LLC is involved. Would this qualify as commercial financing?

@Avi Garg

Any loan would still need to be non-recourse with respect to the Solo 401(k), so no personal guarantee from you.  Depending on your partner's situation, you could go with a fully non-recourse loan or a loan on which the partner provides a guarantee but you do not.  Many banks will do that.

@Avi Garg we are working on doing exactly what @Brian Eastman describes above. Except in my case, it would be my partner, not me, that is using his SDIRA. My existing commercial portfolio lender in OK with just me being on the loan documents as he understands the non-recourse nature of SDIRA or SOLO investing. Not sure about other banks since he was willing to do it  I didn't call around any farther. 

The LLC we are working on setting up will be 50-50 with his SDIRA and it's 20% down payment being one half (not him, technically) and me with the 80% loan for the rest being the other half.

Dan Dietz

@Avi Garg

The loan would be to the LLC, and depending on the lender, the lender will structure it as recourse instead of non-recourse to protect the lender in the event of default. However, the lender still won't be able to go after the the other solo 401k assets in the event of default.

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