Partnering with a solo401k

[Scott Loud]

I've been watching a number of videos on using retirement funds to invest in real estate.  I have read just about everywhere that when you do that, you, personally, are not allowed to benefit from these transactions or have any involvement other than administrative.

However, after watching this video from Anderson Business Advisors about partnering with your solo401k, I am really confused how it is not a prohibited transaction. 

Does anyone have any experience here and can explain why this isn't a violation of the rules?  Also if someone has done this and used leverage, how did you find a bank that was willing to do a nonrecourse loan?

[Dmitriy Fomichenko]

@Scott Loud, 

Have you ever heard of the KISS principle? Here is a quote from Wikipedia:

"KISS, an acronym for "Keep it simple, stupid!", is a design principle noted by the U.S. Navy in 1960. First seen partly in American English by at least 1938, the KISS principle states that most systems work best if they are kept simple rather than made complicated; therefore, simplicity should be a key goal in design, and unnecessary complexity should be avoided."

By following recommendation in this video what are you accomplishing? Simple situation made complex. It will cost you thousands of dollars (instead of few hundred by keeping things simple). You are running a risk of a prohibited transaction (qualified plan partnering with a disqualified person). You will have less flexibility and your hands will be tied up to a degree again because of the disqualified person's involvement. 

[Scott Loud]

@Dmitriy Fomichenko

Thanks Dmitriy, I enjoyed our conversation earlier on the topic. Thanks for the help!