Setting up Solo 401k/ Self Directed 401k with existing rental?

6 Replies

Aloha everyone,

I have an existing rental property financed with a conventional mortgage. I also have an existing TSP retirement account from when I was in the military.


My question is can I setup a self directed or solo 401k using my TSP and somehow have that rental fall under that account?


Looking for a point in the right direction to figure this out.

Thanks in advance!!

-Ryan

@Ryan Hill  Nope, Nope and Nope.

You could move the TSP to a self-directed IRA or 401(K), but that plan could never absorb the property that you currently own personally. As a disqualified party to your retirement plan, you cannot transact with the plan in any direct or indirect fashion.

Brian thanks for the quick reply!

Is there any way to sell the property to a qualified person and then buy it back from them?  Or is this also a no no?

Appreciate your assistance!

Vr,

Ryan

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@Ryan Hill

Yes you can sell it and have your plan buy it back -but it is still a prohibited transaction. 

Buy another property in your plan. Everyone wants to do what you suggest after they figure it out. That’s why most BP contributors suggest you start early with tax free investing—it’s only a matter of time before you see the value in it. 

Remember that with a solo 401K all financing above your cash invested must be a non-recourse loan.  Meaning that credit checks against you personally are not done but against the solo k and property.  Those lenders that do the non-recourse loans are listed in other forums here on BP.  Interest rates are generally hire (typically ~Prime +4%), charge some charge fees more than others.  There is also generally some kind of requirement to keep an amount = to a percentage of the loan in a liquid type of account.