ForumsReal Estate InvestmentsHow to invest both Roth and Pre-tax Solo 401k funds in real estate?

Forums Solo 401k Real Estate Investments How to invest both Roth and Pre-tax Solo 401k funds in real estate?

  • How to invest both Roth and Pre-tax Solo 401k funds in real estate?

    5 Replies
  • Top SubjectReal Estate Investments
    Top ForumsReal Estate Investments

    Justin F
    Top SubjectReal Estate Investments

    August 11, 2022 at 3:27 pm

    I am interested in how one might invest both Pre-tax and Roth solo 401k funds in real estate. . I’m wondering how one would handle receiving funds from non-recourse loans, receiving rental income, and paying expenses.

    Justin F
  • George Blower

    Top SubjectSolo 401k,Solo 401k Contributions
    Top ForumsSolo 401k, Solo 401k Contributions

    George Blower

    George Blower

    Top SubjectSolo 401k,Solo 401k Contributions

    August 11, 2022 at 3:28 pm

    First, it is important that the investment is documented in the name of the Solo 401k and under the EIN for the Solo 401k.

    If the Solo 401k owner invests both Pre-tax and Roth funds in the same investment (e.g. to buy a real estate property with Solo 401k funds), there would be one transfer from the pretax solo 401k sub-account, and a second transfer from a Roth solo 401k sub-account, to purchase the property (e.g. to the escrow or title company).

    Going forward, it would be acceptable for administrative ease for all the income and expense to flow in and out of one single sub-account and then allocate funds between the pretax and Roth sub-accounts in accordance with the investment percentages (including accounting for any gains that accrued in the intervening period).

  • Top SubjectReal Estate Investments
    Top ForumsReal Estate Investments

    Justin F
    Top SubjectReal Estate Investments

    August 11, 2022 at 3:43 pm

    And what about if we have two Pre-tax accounts (husband and wife)? (No Roth.) Does the same scenario with setting up a single sub-account apply? And how we do determine the investment percentages? Would this be whatever the percentages are at the time of the real estate purchase? And do we have to be careful about always moving money in and out at the same ratios every time there’s a transfer?

    Justin F
    • George Blower

      Top SubjectSolo 401k,Solo 401k Contributions
      Top ForumsSolo 401k, Solo 401k Contributions

      George Blower

      George Blower

      Top SubjectSolo 401k,Solo 401k Contributions

      August 12, 2022 at 3:40 am

      1) Yes the same concept applies in a scenario where there are two participants in the same Solo 401k plan (e.g. spouses working in the same self-employed business) who each wish to invest pre-tax funds.

      2) Yes – the investment percentages are based on the ratio of funds invested by each person and funds are moved in/out accordance with such ratio.

  • Top SubjectReal Estate Investments
    Top ForumsReal Estate Investments

    Justin F
    Top SubjectReal Estate Investments

    August 12, 2022 at 2:15 pm
    ...the investment percentages are based on the ratio of funds invested by each person 
    

    As of when? Thanks!

    Justin F

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