Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes
So I got my solo 401k all set up, but haven't had a need to use it yet. I've considered taking a loan out of it to do BRRRR's and flips, but I'm really not crazy about the mandatory 5 year payback schedule. It will make the payments much higher than even a 12% private money loan.
Curious to hear about how others are using their solo 401k's and self-directed IRA's. I'm not interested in owning a property directly inside my solo 401k because of the restrictions/complications on lending, among other reasons. I want all the benefits of owning property (including being able to use the cash flow NOW) but want to tap into the potential goldmine sitting in my 401k...without incurring the taxes and fees.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
8y
You can have your cake and eat it too!!
Solo, self directed, and all these are great programs. The only thing that you have to do is follow the rules!! Following the rules you can make 8%12% maybe even 30% per year and all tax free or tax deferred. That is what I call having your cake and eating it too.
You can buy notes, originate notes from deals you find, or even lend to friends who are investors. You trust your friends, right? How else are you going to have safe investments at great returns??
Again, you have to know the rules of the program that you are in, but also, you have to know how to find great deals or have friends who have great deals.
I want all the benefits of owning property (including being able to use the cash flow NOW) but want to tap into the potential goldmine sitting in my 401k...without incurring the taxes and fees.
So I want to have my cake and eat it too :)
How can I make this happen?
This can't be done according to the current tax code. You cannot make tax-deductible contributions to a retirement account and use those funds now in your own interest without paying taxes or fees.
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
8y
Kyle,
retirement accounts are not designed to provide you with the benefits "now". Truly self-directed Solo 401k plan comes with many great benefits including the ability to shelter significant portion of your income from taxes. So you are actually getting immediate benefit of minimizing your tax liablity now.
Now, once you made your contributions to the 401k you have total control how to invest it. While real estate property is available investment option - you are not limited to this option only. Your investment options are virtually limitless. Take private lending for example, you can generate very nice returns with very low risk and completely shelter those returns from taxes! Can't do that by being a private lender personally.
Decide on what your strategy is and utilize both options (investing personally as well as inside of a tax-deferred vehicle), this combination can be very powerful.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
8y
You can have your cake and eat it too!!
Solo, self directed, and all these are great programs. The only thing that you have to do is follow the rules!! Following the rules you can make 8%12% maybe even 30% per year and all tax free or tax deferred. That is what I call having your cake and eating it too.
You can buy notes, originate notes from deals you find, or even lend to friends who are investors. You trust your friends, right? How else are you going to have safe investments at great returns??
Again, you have to know the rules of the program that you are in, but also, you have to know how to find great deals or have friends who have great deals.