Those who are self-employed (wholesaling generally qualifies) can get the additional benefits of the Solo 401k including: Compared to an IRA, Solo 401k contributions limits are roughly ten times higher.There is no custodial requirement for the 401k.You don't need the additional expense and administration of an LLC to have checkbook control.There is a built in-Roth component whereas IRAs are either traditional or Roth, not both.A spouse can also participate in the same Solo 401k plan.The Solo 401k has additional tax benefits over an IRA when investing into real estate using leverage.The penalties for prohibited transactions are less severe, though it's best not to utilize this benefit :)

As is the case for many of us in California, investing here is cost prohibitive so I’m looking to invest in the Midwest and Southern US Specifically in major metro areas in Alabama.

It is still possible but the amount of red tape you the lender/seller have to go through usually makes it cost prohibitive unless you are a big time player.

Moreover, If someone does engage in prohibited transactions, how would the IRS ever find out?

I live in Long Beach, CA, and I made the decision almost immediately after learning about "Bigger Pockets" to start looking around to invest in out of state deals because of the prohibitive costs hear in CA. 

@John HyreIRC 4975 references prohibited transactions as activities "between" a plan and a disqualified party. 

You are NOT prohibited from forming an LLC in Texas.

Lease Agreement says: Quote:CARE, CLEANING AND MAINTENANCE: Except as prohibited by law, Resident agrees:(a) to keep the premises as clean and sanitary as their condition permits and to dispose of all rubbish, garbage and otherwaste, in a clean and sanitary manner, unless Owner/Agent has expressly agreed otherwise in writing in an addendum tothis Agreement.

It’s generally prohibited for the property owner to be a parent, child, grandparent, grandchild, sister or brother to anyone in the Section 8 tenant’s household. 

I am concerned that my transactions will be prohibited, since I make my living in RE.