Brand new here. I’m establishing a solo 401k to invest in some flips and eventually multifamily holds. I’m looking at how I can do this in partnership with other investors who will use cash and/or loans.
I’m told mixed fund types is ok but I’m curious if my arms-length restrictions on DIY work are imposed on the other investors by proxy. Or e.g. can cash investor #2 take on the kitchen?
Are there any good resource recommendations for learning accounting for a project like that?
@Dana Brash only you are restricted to the disqualified party rules. Most important will be your 401k sharing in the income and expenses pro rata according to the original investment breakdown. Recommend consulting a tax advisor before moving forward with this. There are several here on BP who understand self directed retirement accounts. @Ashish Acharya@Nicholas Aiola@Michael Plaks
@Dana Brash only you are restricted to the disqualified party rules. Most important will be your 401k sharing in the income and expenses pro rata according to the original investment breakdown. Recommend consulting a tax advisor before moving forward with this. There are several here on BP who understand self directed retirement accounts. @Ashish Acharya@Nicholas Aiola@Michael Plaks
Actually, these are the prohibited parties to your Solo 401k. None of them can do any work on the property. Neither can a business they are associated with.
Who’s Disqualified
you
your spouse
your parents and/or your adoptive parents
your natural grandparents
your natural children and/or your adopted children
@Dana Brash Welcome! Investing through a solo 401(k) is a smart move. The arms-length rules apply to you as the account holder, but they don’t automatically extend to other cash investors. If an investor wants to handle work (e.g., kitchen renovations), it's generally allowed as long as it doesn’t directly benefit you personally.
If you need tailored tax advice, we’re here to help. Good luck with your investments!
This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.