Solo 401k Benefits / Disadvantages

[Christian Nachtrieb]

Hey folks,

Currently I am in an "early growth stage" as a real estate investor. I have three properties under my belt, and looking to grow much further beyond that. By day, I'm a video producer and operate a couple of LLC's doing production work and my only retirement setup at the moment is a Roth IRA. Interested in opening a Solo 401k. Obviously this would be beneficial in that I'm skirting some tax money until later in life and thus reducing my taxable income.

However, here's the rub.

I'm not rich. I don't have tens of thousands just laying around. I would LOVE to be able to borrow and take a loan out against the 401k which I know you can do.. BUT it's limited to 50% of the value (limit of $50,000 total). In essence, in an effort to save on taxes, I'm limiting the amount at which I can use my own funds to acquire properties.

Has anyone dealt with this conundrum and what are your thoughts on this situation?

Thanks!

[Daniel Dietz]

@Christian Nachtrieb, hopefully some of the 'Pros' on here will chime in too. I personally use @Dmitriy Fomichenko at Sense Financial, and there are several other good providers here on BP too like @Brian Eastman and other that will chime in here. 

In short, you can not to my knowledge do these at 'the big firms' - you need to use a specialized provider. I intentionally picked on from those who participate here on BP as I figured if they take the time to participate here, they will give *me* the time I need when I contact then too. 

Co-mingling funds can get VARY complicated and I would NOT recommend it. Did it once and was releived to get out of it. You  CAN borrow non-recourse funds (there is a list that float around here of providers for those) that typically require 35-50% down payment. We currently have loans on three properties (8 units). 

One of the other restrictions is that you can not provide labor, like in the case of doing the work on a flip property yourself. 

I think tonights BP Webinar is actually on Self Directed Accounts, might be worth a listen!

Dan Dietz