All Forum Posts by: Brett Synicky

Quote from @Kevin S.:

@Jeff S.

I am considering using my 401K for REI.

Who/what company are you using as custodian?  How did you vet them?

Reason for choosing lending vs buying actual RE in your SD 401K.

Thanks.  

 There are companies that offer different levels of service.   You can have custodial self directed account or checkbook control.  Mostly look at online reviews and maybe search the BP forums for others experiences with the same company. 

Quote from @Nicole Tuffarelli:

hello friends, I have an old traditional IRA from my first job that is sitting in a local bank since early 2000s. it has about 40k

I now have a W2 salaried job for 20yrs where I've participated in a employer run 401k i think with John Hancock. Id love to roll the old IRA into real estate. Any suggestions on how to get the old 40k IRA available to use as a down payment into real estate?

Ive been reading about SEP IRS self directed IRA and 401 k but seems to be for self employed people. any idea how to re-allocate my ira into real estate investments???

my accountant doesn't seem to think its possible

You can certainly move this money into a self directed ira. No self employment required.  All Ira’s are custodial but there are plans that have a checkbook control feature allowing you to essentially bypass the custodian and save time and fees.  

That isn’t a lot of money to buy real estate with, but it might be enough to do some private lending with and grow the principal that way.  If you did want to see what getting a loan looks like to have the ira buy real estate then you can talk with these lenders. https://www.biggerpockets.com/member-blogs/2810/50272-list-o...

@Corey G.Sorry I mistakenly left the r off employer.  

Sole Prop/single Member LLC example: If your net profit on the business (PM) that adopts the 401k is $100k then you can contribute $20k to the 401k. This is the employer side. On top of that you could contribute up to $23k on the employee side. For a total of $43k. Obviously there has to be enough revenue and profit to do this.

 S-Corp example: You're on payroll and you pay yourself $100k.  On the employer side you could contribute $25k and $23k on the employee side for a total of $48k.  

Either of these set ups would be eligible as long as no w2 except you and a spouse.  

What I meant by the 100% is that if you only paid yourself $23k through payroll you can contribute 100% of that to the 401k assuming you don't need that money to live on.  In that scenario the employer contribution would be $5750.  

The employer contributions are a tax write off for the business.  

Hope that clears it up, sorry I wasn't clear.  

For the proper set up of the PM biz and QBI and any other tax/legal questions you'll want to consult a CPA.  @Michael Plaks may be able to assist.  

Quote from @Corey G.:

Quote from @Brett Synicky:

@Corey G. you’re on the right track.  You can definitely create a pm company like you mentioned.  It isn’t hard to qualify for a solo 401k.  Drive Uber, door dash, sell things on eBay/amazon.   Network marketing.   There are many benefits to solo 401ks over sdira, one of the biggest being the high contribution limits so with my examples you likely won’t make very much but for 2024 you can contribute up to 100% of what you make up to $23,500 and since you don’t need the money to live on this would be a good way to add more money to a Roth solo.  

So what are the downsides of creating a PM company and paying myself? I think there are self employment taxes. I heard that contributions are limited to 20% for a SEP IRA but are you saying the solo 401K is not limited?

 If you're incorporated (s-corp) on the employe side you can contribute 25% of what you paid yourself for the year.   Sole prop/single member llc is 20% of the net profit for the year.  This cannot exceed $69k or if over 50, $76,500.  You can contribute up to $23k on the employee side, $30,500 if over 50.  Both of these combined cannot exceed the total of $69k/$76,500, however that entire amount can come from the employer side if you don't contribute on the employee side.   The thing to note is that if you don't need the money to live on you can contribute up to 100% of what you pay yourself/net profit.  Sep works the same on the employer side and does NOT have the employee contribution, among other things.   Hope this helps.  Check with your CPA.  

@Corey G. you’re on the right track.  You can definitely create a pm company like you mentioned.  It isn’t hard to qualify for a solo 401k.  Drive Uber, door dash, sell things on eBay/amazon.   Network marketing.   There are many benefits to solo 401ks over sdira, one of the biggest being the high contribution limits so with my examples you likely won’t make very much but for 2024 you can contribute up to 100% of what you make up to $23,500 and since you don’t need the money to live on this would be a good way to add more money to a Roth solo.  

@Joseph Konney You are a disqualified person. You cannot perform any "work" on behalf of the IRA. You cannot personally benefit from an investment in your IRA. If another agent in your office sold your home, you would benefit since you own the brokerage. This is not a good idea.

Furthermore to address your other comments, you can do white collar work but not blue collar work   Hiring somebody to swing the hammer is ok, you cannot swing the hammer yourself.  

As @Bill B. suggested, go hire a 3rd party brokerage to handle it all. It's not worth risking the invalidation of your IRA account which would cause penalties and taxes.

@Irfan Nasir There are many factors to consider when selecting a company to set up SDIRA. First off, know that a custodian is required for any and all IRA's, however some company's can set up an IRA LLC/Trust to avoid the delays and fees associated with having to go through the custodian for each investment/payment etc. The LLC/Trust is owned by the IRA and gives you as the manager/trustee what's called checkbook control. Do your homework and make the decision you feel is best for you.

@Joshua Talamante Totally get it.  Yes, $250k total plan assets.   If you have checkbook control then you filed the 5500 as the trustee.   If you have a custodial account they should do it.   Happy to discuss further, sent you a DM.  

I assume you have checkbook control, otherwise you would just go to the custodian for questions like this.  That said, specifically what makes you want to pay a 3rd party for plan "compliance"?  Solo 401k generally is not a hard plan to maintain compliance with.  Even if you have checkbook control, your plan document provider should be able to assist you with this.  

You can go through this list and ask.  https://www.biggerpockets.com/member-blogs/2810/50272-list-o...