ForumsReal Estate InvestmentsInvesting Solo 401k in Real Estate LLC Syndicate to Buy Undeveloped Land

Forums Solo 401k Real Estate Investments Investing Solo 401k in Real Estate LLC Syndicate to Buy Undeveloped Land

  • Investing Solo 401k in Real Estate LLC Syndicate to Buy Undeveloped Land

    1 Reply
  • Aravindan V.

    Top SubjectReal Estate Investments
    Top ForumsReal Estate Investments

    Aravindan V.

    Aravindan V.

    Top SubjectReal Estate Investments

    May 20, 2022 at 3:38 pm

    1) Can my Solo401k that you helped establish invest in that land?
    “Developed land” seems OK per https://www.mysolo401k.net/solo-401k/investments/
    But what about undeveloped land?

    2) This is the setup: Feeder-LLC has other partners (unrelated parties) besides Solo401k Trust. Feeder-LLC invests entire proceeds in Main-LLC along with a few more partners (unrelated parties). Main-LLC invests in undeveloped land. In future, Main-LLC raises bank loan to develop land.
    “UDFI does not apply to solo 401k funds that are invested in debt financed real estate where the sole owner of the property is the solo 401k.” says https://www.mysolo401k.net/yes-ubit-applies-to-margin-trading-court-case/
    If Main-LLC raised funds from a bank loan in future, will that trigger UBIT or UDFI?

    3) Should the land be appraised every year when filing 5500EZ?

    4) https://www.mysolo401k.net/solo-401k/private-company-investment/ says “It is acceptable provided that (i) you (nor any closed related persons) are not working for the entity/investment provider in which you intend to invest retirement funds”. In this case, I plan to be a unpaid volunteer Vice President of the LLC making decisions (along with others) about the future direction of the LLC. None of the office bearers (including me) will earn a salary from LLC. LLC will invest in undeveloped land and might decide to engage consultants/engineers/lawyers to subdivide land into plots and lay roads & utilities.

    Aravindan V.
  • George Blower

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

    George Blower

    George Blower

    Top SubjectSolo 401k,Solo 401k Contributions

    May 20, 2022 at 3:40 pm

    Investing in real estate is one of the top reasons that our clients open Solo 401k accounts with us.

    1) A Solo 401k may be invested in undeveloped land subject to the standard Solo 401k real estate investment rules (e.g., can’t buy from one’s self or another related person, no personal use, no working on the property, etc.). See more: https://www.mysolo401k.net/solo-401k-loan-for-vacant-land-purchase/

    2) There is an exception to to Unrelated Debt Finance Income tax with regards to income attributable to real estate subject to acquisition indebtedness which is owned by a Solo 401k (whether owned directly or through an LLC owned by the Solo 401k).

    3) Once the value of the Solo 401k exceeds $250,000 a Form 5500-EZ must be filed and which Form 5500-EZ reports the value of the assets in the Solo 401k (note: we generate the Form 5500-EZ for our clients as part of our service for no additional charge). If the Solo 401k holds a membership interest in an LLC which owns real estate, determining the value of such membership interest will require determining the value of the real estate.

    4) A solo 401k owner may not work for an entity in which the Solo 401k funds are invested whether compensated or uncompensated.

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