All Forum Posts by: Account Closed

@Brian Eastman After much research during this conversation, I agree. That seems to be the only option from my layman perspective. 

Thank you guys for such great information. 

Just for clarification, here is my concept in a nutshell:

1. Acquire properties to fix and flip, fix and hold, or wholesale
2. Owner/operator will be a wife/husband team
   1. Real estate agent for power to buy and sell (commissions may be useful, not sure if necessary)
   2. Personally engaged in procurement activities, project management, and administrative activities
   3. Expecting to employ full-time help in future phases of development

Let me see if I’ve got this right…

Solo 401k:

1. Investment must be in an existing business already producing a self-employed based income for owner/operator/investor – no full-time employees
2. Personal income must be a result of actually performing a role in the business, as in not a 100% automated system. No commissions or benefits from sales of assets; rather, salary or wages and bonuses. I assume roles are open to interpretation and that outsourced help is acceptable so long that it is contracted. In other words, the owner/operator/investor is not stuck doing everything to maintain business.
3. I assume net profits would roll into capital spending for business growth and into retirement fund

I’m confused by these two statements: "you cannot open a solo 401k if your business only generates passive income…” and “…the solo 401k which is used for investing passively in assets such as real estate…” Would you mind clarifying Mark?

ROBS Plan (Sounds like that one has my name all over it…bad joke, sorry)

1. The funds from the plan can be used to start-up a C-corporation
2. That corporation must offer either (or can it do both?):
   1. Goods or services (i.e. retail flips, property wholesaling, investor lending)
   2. Or invests at least 50% in real estate assets that are under the control of the corporation (i.e. rental properties as opposed to REITs)
3. I assume in an autonomous corporation in which the plan is merely a shareholder, there is a greater level of level of authority provided to the operators on how money is managed than provided by the Solo

For the ROBS Plan - Can the requirement for 50% investments in assets be project-based (i.e. spec building)?

For either Plan - Is there a conflict of interest if an LLC I have vested interest in does business with the company being funded by my SD account?

Were the changes something that could have been identified in the original scope?

Were the changes made before you prior to your knowledge?

Consider including language in the contract that states additional scope will not executed without an approved change order. Keep in mind, you do risk the approval process becoming a bottleneck. If you are not able to perform this task on demand, it could become ammunition for the contractor to extend schedule.

You might consider adding contingency to both budget and schedule regardless of promises.

I've been dealing with contractors in heavy industry for about 18 years and that's how we handle it. I don't know what the norm is in real estate.

Hope that helps!

- Robin

Thanks for the response Brian. Good info, that makes sense. 

I have read a little about the ROBS plan, but need to do some more research. It sounds interesting, if not a little intimidating. I am sure that there are business types the plan favors? 

I have an opportunity to roll an existing 401k into a new self-directed account. I would like to use that account to fund a real estate investment business. After reading through this forum, listening to the Jeff Brown podcast #017, and speaking with people who know better than me; I've roughed out this plan. I still feel like I am a ways away from a strong execution plan. Any feedback would be great.

Some background info:

• Currently focused on fix and flips, but open to any opportunity
• The account is from a previous employer
• I currently have a loan against the account for a rehab that will be on the market in a couple of weeks - It’s in a fast selling market and I don’t expect it to sit long

Plan:

1. Roll the total of the existing 401k into a self-directed account
2. 1. Solo 401k or IRA?
   2. Does the business need to be already established to do this?
   3. If I do, can I start a business now before the home sale and consider that sale revenue of the business?
   4. What are the benefits or pitfalls of doing that?
   5. Who to talk to – lawyer, CPA, financial adviser, and/or other?
3. Use some percentage of the self-directed account to fund the growth of a real estate investment business
4. 1. How does the IRS or trustee define “fund the growth of a real estate business”?
5. Use the profits of the business to pay dividends into the account on a periodic basis
   
   1. Is it legal to pay a retirement account dividends?

@Belinda Lopez

Thanks so much! This is exactly what I was looking for. 

I am open to any others as well. 

I appreciate that Chris! I'll try and connect with her. 

I'm new at this and trying to learn everything I can. The best way I know to learn is to do and get involved with those who are doing. 

Hi Armando, 

Good to see folks from League City! I'm new here too, but am really looking forward to connecting with others.

- Robin

Maybe I'm missing it, but I'm having trouble finding a meetup or REI group near the Clear Lake (Houston)/League City area. I realize Houston has what looks like great activity in this regard and I do plan to take advantage of that, but I am also interested in something more local.

Anyone know of anything?

Thanks!

Hi Lazarus! I just said my hellos from League City. Good to see there are many Houston-area folks on the forum.

Good luck to you - Robin.