Self Directed 401k/IRA

[Justin Repp]

Hey folks!

I just switched careers 6 months ago and I am now a Realtor. I need to decide what to do with my previous 401k which has roughly $15k in the bank. I have done some research and it seems that the self directed solo 401k is a great option as I would like to use the $ to invest in real estate and this would give me that freedom. However, from what I read, it seems that if you do invest in real estate with funds from a solo 401k you can't use bank financing...is this true? With only 15k to play with I am certainly going to need to pull in $ from other avenues (HELOC, a partner, bank, etc) so I want to know if this is possible.

[Brian Eastman]

@Justin Repp

A Solo 401(k) may use leverage such as a mortgage or owner-financing, but the loan must be non-recourse - meaning no personal guarantee from you.

The commercial lenders that offer non-recourse loans will not be an avenue for you at the current time.  They want 35-40% down, 10-15% in reserves and loan amounts of at least $50K.

As such, you would want to look at joint ventures or private lenders.  Any such partner/lender cannot be a family member that is a disqualified party to your plan.