Solo 401k and Buying Property

[Steven W.]

I had a great conversation with @Dmitriy Fomichenko from Sense Financial today about setting up a Solo 401k, so I can roll over my IRA into an account in which I can make investments in real estate. He did point out some potential disadvantages of purchasing RE through this account--no mortgage interest write off, no depreciation, higher interest rates, larger down payment--that of course I wouldn't suffer if I bought properties in my own name (instead of the 401k account).

That put a bit of a damper on the project, since it would be a lot easier for me to fund purchases with my IRA money (no limit on properties, no debt/income ratio issues, plenty of funds sitting around as someone who is 50 and has contributed regularly throughout the years). Given that I live in San Francisco and both my wife and I work, I was planning on buying turnkey properties out of state, as I have done in the past.

He didn't suggest not buying RE with the 401K at all--he just pointed out some of the shortcomings.

What do folks who have used Solo 401k and/or SD IRAs think? Has investing in RE been a good thing for you, or have you preferred to purchase notes and/or first trust deeds?

I avail myself to the wisdom of the BP masses.

Steven

[Dawn Anastasi]

One thing I am unclear about in this example is what happens when you sell the property for a profit -- do you pay taxes on the gain or if it's from a Solo Roth 401k, you pay no taxes?