Single Solo 401K for Multiple Properties?

[Todd Magin]

First, a very brief snapshot of my plan is in order: Buy and hold multiple small apartment buildings and hold each building in a series LLC. I said it would be brief! :)

Funding for these will need to come mostly from my IRA funds (I may be able to do the first deal outside the IRA)

Can I setup a single SOLO 401K with a master LLC/S-corp, and then have the buildings held in subordinate series LLCs? I hope solo. :) Or do I need to setup a SOLO 401K for each investment?

Of course, I'm early in this process and intend to consult with a RE lawyer (entities) and RE accountant (SOLO 401k setup), but I'd like to know what everyone here has done.

[Steven Hamilton II]

Originally posted by @Todd Magin:

@Steven Hamilton II

Therein may be my problem. I have an existing business (non RE) which was setup as a S-Corp almost 20 years ago, so that would be how I would qualify for the Solo 401K. Is it worth it, or even possible, to convert the existing business to an LLC?

I don't understand the "tax and basis" differences between an LLC and an S-Corp (both are flow-thrus), so I'll need to consult with a CPA who is well versed in RE?

I'm willing to put up with some pain to do this the right way.  There's no reason to save $100 now and lose $10,000's later. :)

 Todd,

I'm happy to answer that question for you. You can use the other business to fund the 401k easily. What I was saying is you don't want that s-corp to own the rentals in any way. Even an LLC taxed as an S-corp is a bad idea for rentals because of the way basis is calculated. If you buy a property for 100k and finance 80k your basis inside the corp is 100k. Your basis outside the corp is only 20k. Therein lies the problem resulting in if you refinance it in say 5 years and pull out say 30k of equity you would cause a taxable event.

Feel free to PM me if you need a further explanation.