Got a self directed 401K, now what?

[Stone Jin]

We are looking to open a self directed 401K to invest in more real estate.  There has been lots of posts on BP about the benefits and how to set it up.  However, we are looking for information on what happens after you open a 401K.

Question1: Can the BRRR method be used with houses owned by the 401K

Question2: Is there anything different about buying insurance for the home?

Question3: Once the 401K account is opened with checkbook control, do you need to open a bank account?  Does someone typically just write a check from 401K to bank account to fund?

Question4: If a bank account is required, can a debit card be used.  I read somewhere that credit cards are prohibited.

Question5: If a bank is not required, is there a way to get a certified check from the 401K?  

Thanks in advance

Stone

[Brian Eastman]

@Stone Jin

You can use the BRRR method with a Solo 401k. The amount of leverage you will be able to utilize will be slightly less, as the plan must have a non-recourse loan and those lenders typically want 30-40% down, but the principals still apply.

The 401k is a trust, and does not come with any built in banking.  The first thing you do with your plan once it has been authored is open a bank and/or brokerage account at the institution of your choosing.  Funds from a prior plan are then rolled directly to the new plan and deposited to this account.

You can use most banking features such as debit cards, wires, cashiers checks, etc.  You cannot get a credit card because you cannot put a personal guarantee on any 401k debt.