All Forum Posts by: George Blower

@William Jenkins

Doesn't sound like you would use financing for the contemplated investment of retirements, but if you did it would need to be non-recourse (either via a Solo 401k or SDIRA) and if done via an IRA subject to Unrelated Debt Finance Income tax.

@John Stone

Regarding the required distributions requirement that applies to inherited IRA accounts, a practical concern is that one invests his/her funds in an illiquid investment via a self-directed inherited IRA and does not have enough cash to satisfy the RMD.

@Obed H. Bey

I wonder if your friend exceuted a ROBS transaction to fund his business (see eg: https://www.biggerpockets.com/member-blogs/3441/44596-rollovers-as-business-start-ups-robs-is-not-a-participant-401k-loan).  

Please note that there are specific steps to follow (including operating the business via a C-corporation).  If a Rollover as Business Startup is properly followed, retirement funs can be invested in one's business without incurring taxes or penalties.

@Adam Merrill

Another consideration not mentioned here is whether you intend to invest on a passive basis. For example, if you invest via an IRA or Solo 401k, you can't work on the property (e.g., can't mow the grass, paint, etc.).

@Will Stahl

The notion of your father investing with you brings up host of complexities that may make it at least prohibitive if not prohibited.  

One alternative may be for your father to take a loan from his retirement account.

In order to be able to do so you father would need to be separately self-employed (although not necessarily on a full-time basis as I know that he just retired).

Regarding taking a 401k loan:

• If your father is self-employed with no full-time employees & he could set up a Solo 401k, rollover the funds and take a 401k loan from the Solo 401k.
• He can borrow up to 50% of the balance not to exceed $50,000.
• The repayment terms are equal monthly/quarterly payments (as you prefer) of principal and interest (e.g. prime + 1%) spread over a 5 year term (or longer if you will use the loan to purchase your primary residence). 
• There are no prepayment penalties and no restrictions on what you can do with the proceeds of the 401k loan. 
• Please note that he is obligated to pay back their 401k loan (regardless of the performance of his real estate investment with you).

@Jason Graves

I understand that you have a non-prototype account (also referred to as an investment only account) at Fidelity for your Solo 401k. 

If acceptable to the escrow company, one option is certainly a check.

Another option is wire transfer using Fidelity's One-time withdrawal form: https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/customer-service/non-prototype-retirement-account-withdrawal.pdf

@Dan Mahoney Good point!

@Bryan O. If the plan is provided by TD Ameritrade, you need to restate the plan to a Solo 401k plan provider that offers a plan which allows for your desired investment options.  You can even keep the funds at TD but in an account where you will be able to control and direct your funds.

@Bryan O.

While I am certainly sympathetic to your situation, in my experience what you describe virtually never comes up because the Solo 401k owner has checkbook, wire and/or ACH access to their bank and/or brokerage accounts and the bank or brokerage (as applicable) does not approve the transaction, does not handle any tax reporting/record-keeping nor handle compliance support in educating clients regarding the Solo 401k rules regarding investment, contribution, loan, etc. 

While it is certainly a positive development that a bank/brokerage would set up a specialty division to support Solo 401k plan, it is just as easy to select whichever bank and/or brokerage you prefer and then, more importantly, choose an expert and responsive Solo 401k provider who can help guide you through the process.

@Bryan O.

Our practice is to discuss at the outset the limited role of the bank with bankers who are unfamiliar with Solo 401K plans. In our experience, most bankers “get it” and this easily avoids the type of issues that you describe.

@John Moran

This may also subject the income to unrelated debt finance income tax.