Seller Financing Solo 401k Owned Real Estate
BACKGROUND:
I wanted to make sure that I am able to do this following deal.
Property in my Solo 401K that I am selling I had it listed for 550K.
Offer is 540K, but requires a seller financed second mortgage of 38K at
0%.
Am I allowed to hold that second mortgage? After the sale can I sell
that second mortgage note to a third party that is NOT a disqualified
person? Is this legal in terms of sales within a Solo 401K. Before I sign any
paperwork of this I wanted to make sure it is acceptable.
ANALYSIS:
- Generally speaking, it is acceptable for a Solo 401k to sell real estate owned by the Solo 401k to an unrelated person where part of the sale price is financed in the form a second mortgage provided that the terms of the second mortgage are on market/arm's length terms. Here, for example, you would need to be prepared to demonstrate that a second mortgage with 0% interest (and the other payment terms) meets this standard.
- Furthermore, the Solo 401k would also be permitted to sell the second mortgage to an unrelated person at the market price.
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