All Forum Posts by: Bob Basting

We are looking at relocating to the Marietta area in January and would like to explore the foreclosure market as an option. Would appreciate anyone familiar with foreclosures in this area to contact me.

Thanks.

Thanks Guys,

So, I think I understand, but let me walk through it again.

The initial purchase and rehab would be done as a cash deal with a Tenancy in Common between my Solo 401k and my buddy, as an individual investor.

Once the rehab was done and we got a renter in place, we would then "sell" the property to an LLC that both my friend and I are individual investors (not the Solo 401k) and use non-recourse lending to finance the property. Under this scenario, the Solo 401k would be entitled to profits from the sale of the property, but not the ongoing stream of income from the rental. Instead, the LLC would get the rental proceeds.

Because the Solo 401k is selling to the LLC (in which I am an individual investor), does this make it a prohibited transaction?

Working my first deal with a friend of mine. My investment funds are from my Solo 401k. We are able to do the deal with cash, including renovation costs, using a Tenancy in Common arrangement. He will be doing the renovation with no involvement from me, so as to avoid a conflict of interest. My question is this:

We are unsure yet as to whether we will flip this property or turn it into a rental. It really depends on whether we can get our asking price after rehab. If we decide to turn it into a rental, our goal would be to finance the property for an ongoing stream of income and recoup our initial investment. If we open a joint LLC that essentially owns the property, is this considered a prohibited transaction because the Solo 401k Trust is an interested party in both the original acquisition and the LLC that will acquire the post-rehab property and subsequent loan? If so, how else might the deal be structured in order to avoid conflict of interest?

 Ah, I guess that would make sense. So they would list it as a $100k sale because that's the loan amount they were clearing and then selling it at a bank loss. 

Thank you!

 The foreclosure price was listed in the price history on Zillow. I don't know if Zillow is highly reliable or not, which I guess is another question.

I'm working on my first flip. Have found a home and the numbers seem to work out. What's curious is the home was sold at a foreclosure auction in Dec 2016 for $100k. On Jan 17, 2017, the home was listed at its current price of $69,900. Why would someone buy it at auction and then sell it for much less, or am I missing something here? Any red flags that I should be aware of? 

Agreed. That's not what I was implying. Perhaps I worded it incorrectly, but the intent would be to put profit distributions into each in the amount of the original investment (i.e., 60/40 split would result in 60/40 reinvestment of the profits accordingly).

I appreciate the feedback. I can definitely see the issues involved with this type of scenario. 

Another question pertaining to Solo 401k. I see mention of Tenancy-in-Common Ownership, where you can seemingly comingle Solo 401k funds and non-retirement funds in a real estate purchase. Does this mean that any profits from the sale of the real estate could technically be split and returned to each funding source in direct proportion to its original investment? In other words, if I decide to invest 50k in a property and 30k of it comes from my Solo 401k and 20k comes from my non-retirement savings...then we improve the property and sell it for 50k in profit. Am I able to disburse 30k to my solo 401k and the rest to my personal savings?

I think I understand that the rules would still apply that I need to be an investor only, but this may be exactly what I am looking to do. I want to bolster my retirement funds while also making money for day-to-day living expenses.

I am interested in hearing more about the Solo 401k option. I don't mind being an investor-only, but as a lifelong project manager, I also wouldn't mind gathering a team and being able to provide my expertise on the manual labor side of the business as well. Still looking at all options, but I know I want to grow my retirement savings above and beyond what I'm getting in the marketplace currently.

Thanks, Mark. This is great information.