Mid Term Rental under Solo 401K Plan

[Eden Meng]

Hi Wonderful BP Community,

I am in the process of acquiring an out of state property for mid term rental. The proceeds used to acquire the property will be from my solo 401K. I have my team on the ground when it comes to real estate agent, cleaner or other critical team members to make the property up and running. I have reviewed the IRC publication for prohibit transactions between the plan and a disqualified person which contain a few criteria including selling, exchanging and leasing the property. I dived deeper on the " leasing property part" and the only clarification is not to lease the property to disqualified persons. I would like to clarify if there is a possibility that I could be the leasing agent for the property?

Your input is greatly appreciated !

Eden

[Ashish Acharya]

When using a Solo 401(k) to acquire a property, you must be cautious about prohibited transactions. Under IRS rules, you, as the plan holder, are considered a disqualified person, meaning you can’t perform services that benefit you directly, such as acting as the leasing agent for the property. Managing or leasing the property yourself would likely be considered self-dealing, which is prohibited.

To stay compliant, it is best to hire an unrelated third party to handle the leasing and management duties. This keeps everything above board and avoids issues with prohibited transactions under the IRS guidelines.

So, in short, you cannot act as the leasing agent, but you can have your team on the ground manage it for you.