Has anyone BRRRR-ed using Solo 401k funds?

2 Replies

I've read that you need to get a non-recourse loan from a bank to fund rehab costs. Assuming this is doable, has anyone BRRRR-ed using Solo 401k funds, refinanced, and add the cash back to the Solo 401k? Then do it all over again? I know you won't get the cash in your pocket right now but it seems like a good way to grow retirement funds.

Thank you!

@Yumiko A.

We have lots of clients using the BRRRR strategy in either a Solo 401(k) or a self-directed IRA.

Because a non-recourse loan is riskier to the lender, the LTV's are a little lower than one might expect when borrowing personally. This results in trapping a little more plan capital in each deal and slows the acceleration of value a little, but it is still a positive strategy for an IRA or Solo 401(k).

The smart combination of buying at a discount, adding value, and then using leverage once the asset is performing to pull equity and launch the next project is just a very good formula when executed well.

Be sure to start by reaching out to non-recourse lenders to learn about their programs.  You want to be sure the project you are considering will be able to be financed once the rehab stage is completed.

@Yumiko A.

I agree this can be a great way to grow your retirement funds. Yes, any loan that your Solo 401k receives must be non-recourse. The reason is, it would be a prohibited transaction for you to sign a personal guarantee on a loan for your 401k because you are a disqualified person. The non-recourse loan does not require a personal guarantee. When utilizing the BRRRR strategy with your Solo 401k, you will need to make sure that you do not transact with any disqualified persons either. Neither you nor certain family members could occupy the property. We have seen this strategy work well for many clients as long as proper due diligence is performed and the PT rules are understood and followed.

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