Purchasing Real Estate with a Solo 401K loan

[Dawna Willis]

I would like to roll over funds from a 401K with a previous employer to a solo 401K with the intent to take a personal loan of 50% of the funds.   I would take the $20K and add it with personal cash from my husband to purchase a duplex from an older relative for $35K.   It appraises for $52K and is currently occupied with 2 long-term Section 8 tenants.  I would do the max loan repayment of 5 years, but intend on paying off in maybe 2.5 years if not sooner by using most of the rent payments towards the loan repayment.  Is there anything I need to consider that I may be missing if using a solo 401K loan?   No early repayment penalties, nor any restrictions on what to purchase with the loan money?   I know purchasing property from a relative is prohibited inside a retirement vehicle, but want to make sure it doesn't apply to the solo 401K loan as well.   

Thanks in advance for any insight.  

[Carl Fischer]

@Dawna Willis

If you can set up a solo 401k it should work.   You may want to consider buying it just in your 401k as long as the older relative is not a lineal ascendant thus a “disqualified person”.  Or if you can’t have a solo 401k convert old 401k to a SDIRA and buy it in the SDIRA again as long as the older relative is not a lineal ascendant thus a “disqualified person”.