Rental Property Investor · Ontario, CA · Member since 2016 · 7 posts · 5 votes
Wanted to see if this strategy is obtainable. I want to roll over my 401k and traditional IRA into a solo 401k directed to real estate to buy turn key properties with positive cash flow. Am I able to use the appreciation and cash flow to grow the solo 401k and also maintain the operating expenses of the rentals?
1. First, I presume that (i) you are self-employed; and (ii) you do not have any full-time w-2 employees (i.e. working 1000 hours or more per year) working for your self-employed business or otherwise working for you. Given this understanding, you would be eligible to establish a self-directed Solo 401k which allows for investing in real estate.
2. If you are self-employed with no full-time employees, you can set up a Solo 401k through a 401k provider which allows for investing in real estate. In that case, you can simply have the account at a bank or brokerage where you will have direct checkbook control.
3. All of the income and expenses will need to flow in and out of the retirement account.
5. You can't live on the property or otherwise use it for personal use.
6. You can't work on the property as it must be a passive investment (e.g. you must hire someone to fix the toilet and can't pay the expense with non-retirement funds).
7. You must purchase/sell real estate from/to an unrelated person and the real estate can't be titled in your name personally (e.g. in the case of the 401k, it would be titled in the name of the 401k and you would sign as trustee of the 401k).
8. You should verify that you are eligible to transfer the funds from your existing retirement account (e.g. if the funds are in your current employer 401k, you will likely not be able to transfer until you quit your job).
1. First, I presume that (i) you are self-employed; and (ii) you do not have any full-time w-2 employees (i.e. working 1000 hours or more per year) working for your self-employed business or otherwise working for you. Given this understanding, you would be eligible to establish a self-directed Solo 401k which allows for investing in real estate.
2. If you are self-employed with no full-time employees, you can set up a Solo 401k through a 401k provider which allows for investing in real estate. In that case, you can simply have the account at a bank or brokerage where you will have direct checkbook control.
3. All of the income and expenses will need to flow in and out of the retirement account.
5. You can't live on the property or otherwise use it for personal use.
6. You can't work on the property as it must be a passive investment (e.g. you must hire someone to fix the toilet and can't pay the expense with non-retirement funds).
7. You must purchase/sell real estate from/to an unrelated person and the real estate can't be titled in your name personally (e.g. in the case of the 401k, it would be titled in the name of the 401k and you would sign as trustee of the 401k).
8. You should verify that you are eligible to transfer the funds from your existing retirement account (e.g. if the funds are in your current employer 401k, you will likely not be able to transfer until you quit your job).
Yes, if you are eligible for a Solo 401k, you can do as described. All growth from appreciation and rental returns would belong to the Solo 401k and the 401k would pay any investment-related expenses. I would recommend you reach out to a few plan providers to learn more about your options and their respective offerings.
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
7y
@Jason Ines Yes you can but if you are using it as down payment and financing the rest, you would have to use non recourse financing which won't have nearly as good of terms as conventional financing.
Rental Property Investor · Winston Salem, NC · Member since 2018 · 102 posts · 66 votes
7y
@Jason Ines
There’s some great info on YouTube. Try advanta on YouTube.
I thought a lot about doing it and I will share why I passed. I think the profit and joy of buy and hold real estate is being a hands on owner and property manager. I have learned to be efficient, profitable and wiser, hands on.
I don’t want to be told I can’t deploy sweat equity or I need to be careful and set up my retirement account in such a manner that I can’t use other people’s money without complications or recourse.
The turn key rental providers are actively pushing the ira narrative, but it does not appear to be the panacea to me. Plus, its tax season. Think about all the depreciation, and tax abatement benefits you get from using after tax dollars.
Check it out fully before using your ira funds for buy and hold real estate.