Solo 401k Investment via tenancy in common with personal mortgage

QUESTION:

Looking to buy a property with my solo 401K but don't have enough money, will I have to get a loan in my name. Can I be a co-owner with?

I will have 50% down paid from solo 401k trust and then 50% as mortgage under my name. ownership will be split 50/50.

ANSWER:

While you can certainly purchase a property with funds from your solo 401k as well as personal (non retirement) funds via a tenancy in common, the purchase must be an all-cash deal. As such, it is not compatible with the proposed structure that you described below. If you were to obtain financing for the portion of the purchase price that you are paying with personal funds, this financing could not be secured via a mortgage on the property. Instead of a mortgage on the real estate owned by you and the solo 401K via tenancy in common, you could take a home equity line of credit which is secured by your personal residence and use the proceeds of that home equity loan to invest via a tenancy in common with your solo 401k.

In addition to the point discussed above, please also note that with respect to a property held as a tenancy in common with your solo 401k, all the expenses and income related to the property must flow directly to the owners (i.e., you and the 401K). For example, if it is a rental property the tenants will write two checks (i.e., one to you and one to the 401K). Similarly, if the toilet breaks, you will need to hire an unrelated person to repair and pay this individual with two checks (i.e., one from the 401K and one from you personally).

To learn more about he solo 401k rules, VISIT HERE.