All Forum Posts by: Justin Windham

I agree with the posts above. With a typical self-directed Solo 401k plan, you may be talking about hundreds of pages worth of tax, legal, and investment rules found throughout the documents. It's not something you want to piece together on your own.

Thanks, Mark.

At the risk of contributing to what may have been a thread hijacking by us self directed guys, Mark is correct. An S-Corp is not technically a prohibited asset, though an IRA's investment into one causes the S-Corp to lose its subchapter S status.

@Dawn Vought

If you have your plan with Nabers, you most likely already have the PPA document version. If this is the case, the big restatement that others have mentioned has already been done for you. I don't know if they issued any amendments for their plans in 2014 though.

We are offering tax season discounts for all Bigger Pockets members for the month of April.

IRS-approved checkbook control Solo 401k plans are a great way to get more money into real estate, save money on income taxes, or use participant loans to help with financing your own projects.

For more information, feel free to give us a call, email us, or visit our website:

Phone: 800-716-1970
Email: [email protected]
Website: www.discountsolo401k.com

https://www.biggerpockets.com/companies/DiscountSolo401k

@Mimi H. 

You are right about the great advantages of the Solo 401k plan. Also, being employed doesn't preclude your having a Solo 401k of your own if you meet the eligibility requirements.

Others have addressed the need for earned income from self-employment to be eligible for the Solo 401k (1 of the eligibility requirements). I will address your questions regarding structuring the ownership of properties within a Solo 401k in case you do get past the eligibility portion of your Solo 401k quest.

When you mention putting the rentals under one LLC, that could be interpreted 2 different ways.

1. You have an LLC of which you are the member (owner) and the LLC owns the property. This is an investment "outside" of the Solo 401k and probably a bit more widely understood among real estate investors.

or

2. You are talking about a Solo 401k owned LLC that owns the property. Many Solo 401k participants invest their Solo 401k directly into real estate because an LLC is not required for such an acquisition nor is it required to have checkbook control over your Solo 401k funds, unlike with an IRA LLC. That said, some will choose to create an LLC (or multiple LLCs) of which the Solo 401k is the member to meet additional goals such as asset/liability protection among multiple properties. Either way, you would not need to setup a Solo 401k for each investment.

The typical self-directed Solo 401k structure is as follows: The Solo 401k is setup and adopted by your business or self-employment activity (assuming earned income and no full-time non-owner employees). You are the participant in the Solo 401k and as such are able to make contributions to the plan from your earned income from the adopting employer (in addition to rolling over or transferring funds from most existing retirement accounts and plans). You are also the trustee of the 401k trust so you have checkbook control of the 401k funds. You choose the investments for the Solo 401k which could include direct investment into real estate without the need for an LLC, or you could choose to use an LLC if you and/or your advisors thought it would be beneficial according to your goals.

If you have a self-directed 401k that allows for investment into real estate, there is no limit on the amount you can invest into a property. You will not pay taxes on the investment of your 401k until you decide to distribute the funds.

Since you mentioned "percent" in your question, perhaps you were thinking of taking a participant loan from your 401k and investing into real estate. In that case, the investment would be made by you instead of your 401k. The limit for taking such a loan from your 401k (if your plan allows for participant loans) is 50% of the 401k balance or $50,000, whichever is less.

I want to add that Dmitriy's post is excellent too. I just didn't see it till after I posted my initial response.

Hi Kyle. I live in Arvada too. I agree with Michael to the extent that each is probably best suited to different needs. Life insurance is great if you need life insurance. A good 401k is an excellent investment vehicle. Full disclosure, I set up Solo 401k plans that can invest into real estate so I'll understand if you don't consider this unbiased. I will say that you can buy life insurance within many 401ks plans, so that may factor into your decision as well.

Happy Birthday, @Joshua Dorkin!