Family funding w/ private money

[Shannon Carter]

Hello Bp,

I would like some feedback on this creative financing I am trying to do.

I have done 2 successful flips and also have one 1 buy and hold.

Now that I have a little skin in the game I’d like to ask my dad who is 62, with a 6 figure 401k to allow me to use $50,000 to invest in more real estate. I’d like to pay him as if he’s my private money lender after each deal.

He’s funded my deals by taking out a loan from his 401k and I would make the biweekly loan payments , and pay him a fee once I sold my flips and refinanced my last property. That way we both made profit.

But we can’t do another 401k loan for another 6 months .

My question is , what steps would I need to take if he does the 50k withdrawal instead of the loan? Since he's 62 I know we can withdraw with no penalty, but is there a way to avoid taxes ? Like transferring the funds to a SDIRA or Roth IRA ?

Thanks for the feedback

Also, I'd like to maybe do 2 deals at a time this year if the opportunity presents itself, should I start building relationships with HML's ? Or am I on the right track by avoiding fees and points and keep partnering with my dad. Thanks

[Brett Synicky]

Quote from @Rick Pozos:

Self directed IRAs are great. BUT Dad can NOT lend you money from his self directed IRA. There are prohibited people that the IRA can not do business with. Parents and kids can not borrow from, buy from or sell to parents and vice versa.

You can get an aunt or uncle, cousin, friend from work, Dads friend from work. Just not lineal: parents, kids, grand parents, grand kids or spouses of the above.

 If dad qualifies for a Solo401k (legitimate self employment activity and no w2 employees other than spouse working more than 500 hours annually) he can take a participant loan up to 50k or 50% whichever is less and use that for any purpose including loaning money to a prohibited party.   BUT - there's the current 50k loan outstanding.  @Shannon Carter I commented on your other post also - is the current 401k with a current employer?