Self-Directed Solo 401(K) Real Estate Investing

[Robert Chaiton]

Hi BiggerPockets,

I have read the book advanced tax strategies and want to take advantage of the Self directed Solo 401(K) I have a few question and was hoping the community could help me out.

Currently I have a W2 job, but I also do business consulting on the side and after reading the book I want to create a sole proprietorship in order to utilize the solo 401(k) retirement option. Once I create the sole proprietorship I want to transfer my current 401(k) from my W2 job into my self directed solo 401(k) plan. Then contribute as much as possible into the plan as an employor contribution from my sole proprietorship and match it with my earnings.

Once I have enough equity/money built up, I want to purchase a buy and hold investment property. The catch here is, I want to create a management agreement with the property which is owned by my self directed solo 401k to earn the cash flow from the property while making the net income 0 or negative. The agreement will be with my consulting company (or a new LLC/ sole proprietorship company). My questions with this are:

1. Is it possible to transfer my current W2 401(k) into a self directed solo 401(k) while contributing to receive contributions from my current employer?

2. Is it possible to create a management agreement with the property owned by my self directed solo 401(k) and my consulting/new LLC/business to earn cash flow from the property through management fees

Does it matter where my CPA is located. I live in Denver but would be open to help from a professional anywhere on this topic.

Thanks for reading!

Bobby

[Linda Weygant]

Originally posted by @John Underwood:

Originally posted by @Linda Weygant:

Secondly, if you are affected by COVID, your employer/plan administrator *may* be allowing a $100,000 distribution from the plan that is penalty free.  The tax liability would then be spread out over three years.  So you may want to look and see if this is an option that is workable for you.  Talk to a knowledgeable CPA about the ins and outs of this.  @Natalie Kolodij is a rock star on this topic. 

 This brings up a question for me.

I have a traditional 401k from a previous employer. (Non Roth)

Can I pull up to 100k from it and roll it into either my self directed Roth IRA or my solo401k (Roth)?

Are either or both allowed?

I know I'd have to pay the tax.

But you said you could spread this out over 3 years?

I'm honestly still getting up to speed on this new rule, but I know that Natalie knows this inside and out, so hopefully she'll come and answer this when she sees it.