Solo 401k funding and loans

[Steven Lamkins]

I am buying a rental property with my solo 401k. However this will use most of my funds. Has anyone here purchased property with their solo 401k? My question is: after purchasing the property and renting it out can my 401k then take a loan out against the property. I'd like to free up this cash for another deal.

[Brian Eastman]

@Steven Lamkins

If your Solo 401k provider did not provide information on this topic prior to establishing the plan, they are not doing their job.

Yes, a Solo 401k may use leverage such as a mortgage.  The mortgage has to be non-recourse, meaning no personal guarantee from you.  This limits your choices of lenders and will require higher down payments and reserves than you might see with a loan on which you are pledging a personal guarantee, but it is still a powerful way to use leverage in your retirement plan and generate higher overall cash-on-cash returns.

The leading lenders are First Western Federal Savings and North American Savings Bank.