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  • Real Estate purchase

    17 Replies
  • Top SubjectReal Estate Investments
    Top ForumsReal Estate Investments

    Christine Dull
    Top SubjectReal Estate Investments

    January 18, 2022 at 3:25 pm

    We would like to set up a self-directed 401k to purchase a real estate lot in Oregon, and have a couple of questions:

    1-my husband has a current 401k plan that we will partially liquidate to be able to transfer/deposit funds into the new self-directed 401k. How far in advance should we do this before we need the funds to start escrow/how long does it take to set up the account? The escrow will need to close early February – do we have enough time?.

    2-are there any limits/guidelines about how much money we initially should put in the self-directed IRA? Is it difficult to add money into it later? We plan to deposit the purchase price of the lot plus some additional money to cover any maintenance fees and taxes for the first year. But if unexpected expenses pop up, is it easy to add money to the account?

    3-will the self- directed 401K be solely listed in my husband’s name, since his current 401k funds will be transferred into it? I.e. the property will just be listed in my husband’s name? Or can my name also be added to the self-directed 401k name/ownership of the property?

    Christine Dull
  • George Blower

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

    George Blower

    George Blower

    Top SubjectSolo 401k,Solo 401k Contributions

    January 18, 2022 at 7:44 pm

    @cdull

    Top SubjectReal Estate Investments

    Thank you for posting your questions!

    I understand that the funds are in your husband’s current 401k – do you mean current employer plan?

    If yes, he likely won’t be able to transfer the funds until he quits his job (while there are limited exceptions they typically don’t apply).

    In that case, the first step will be to contact the administrator of the current employer plan to find out if he is eligible to transfer his funds to an IRA (if not, he won’t be able to rollover his funds to an IRA that will allow him to invest his retirement funds in real estate).

  • Top SubjectReal Estate Investments
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    Christine Dull
    Top SubjectReal Estate Investments

    January 19, 2022 at 11:29 am

    I think I mistakenly said my husband’s 401k when I meant his traditional IRA (unaffiliated with his company plan).

    Can you please respond to my initial 3 questions based on this correct info? Thanks!

    Christine Dull
  • Top SubjectReal Estate Investments
    Top ForumsReal Estate Investments

    Christine Dull
    Top SubjectReal Estate Investments

    January 19, 2022 at 11:42 am

    His traditional IRA is with Wells Fargo Advisors.

    Christine Dull
  • George Blower

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

    George Blower

    George Blower

    Top SubjectSolo 401k,Solo 401k Contributions

    January 19, 2022 at 11:53 am

    I understand that your husband intends to open a solo 401k and rollover funds from his traditional IRA at Wells Fargo in order to invest in real estate (note: real estate is one of the top use cases for our Solo 401k clients).

    The threshold issue is whether he is eligible to set up a solo 401k: specifically, he needs to report earned self-employment activity on his taxes and have no non-owner w-2 employees for any business owned by either of you.

    If yes, he can certainly set up a Solo 401k, rollover funds from his traditional IRA and then invest with checkbook control including real estate.

    Question:

    1-my husband has a current 401k plan that we will partially liquidate to be able to transfer/deposit funds into the new self-directed 401k. How far in advance should we do this before we need the funds to start escrow/how long does it take to set up the account? The escrow will need to close early February – do we have enough time?.

    Response:

    While we move very quickly (e.g. provide the documents to establish within the same day or 24 business hours after you open a Solo 401k), the longest step in the process will be to transfer the funds from the existing account (i.e. IRA at Wells Fargo). The funds will need to transfer by check payable to the Solo 401k and then mailed to the address of record (note: we will prepare the transfer paperwork as part of our service). The transfer check would then be deposited in the bank or brokerage account for the Solo 401k. Once the funds clear, they can be invested immediately including real estate. The typical time for the funds to transfer is 10-15 business days.

    Question:

    2-are there any limits/guidelines about how much money we initially should put in the self-directed IRA? Is it difficult to add money into it later? We plan to deposit the purchase price of the lot plus some additional money to cover any maintenance fees and taxes for the first year. But if unexpected expenses pop up, is it easy to add money to the account?

    Response:

    You can roll over as much funds from your traditional IRA as you wish and you can roll over additional funds later from the IRA to the Solo 410k (as much and as many times as you wish). Each time you roll over funds, the process will be the same as the process described above.

    Question:

    3-will the self-directed 401K be solely listed in my husband’s name, since his current 401k funds will be transferred into it? I.e. the property will just be listed in my husband’s name? Or can my name also be added to the self-directed 401k name/ownership of the property?

    Response:

    The property must be purchased in the name of the Solo 401k. If the retirement funds in the Solo 401k are solely the funds rolled over from your husband’s IRA then the real estate investment will solely be held in the name of the 401k for the benefit of your husband. Please see more regarding real estate investment procedures here: https://www.mysolo401k.net/solo-401k/solo-401k-real-estate-investment-procedure/

  • Top SubjectReal Estate Investments
    Top ForumsReal Estate Investments

    Christine Dull
    Top SubjectReal Estate Investments

    January 19, 2022 at 12:14 pm

    Thank you so much! This has been very helpful!

    One additional question:

    Can we pay the annual fee for the solo401k out of the trust?

    Christine Dull
  • Top SubjectReal Estate Investments
    Top ForumsReal Estate Investments

    Christine Dull
    Top SubjectReal Estate Investments

    January 19, 2022 at 1:07 pm

    Sorry – just want to clarify one more thing:

    “he needs to report earned self-employment activity on his taxes and have no non-owner w-2 employees for any business owned by either of you.”

    If I am undertanding correctly, I take that to mean that GOING FORWARD he will need to report the self-employment activity.

    Currently he does not have any self-employment activity. This will be the first self-employment investment he is making.

    There will be not be any other non-owner W2 employees.

    Are we still OK to proceed?

    Christine Dull
  • Top SubjectReal Estate Investments
    Top ForumsReal Estate Investments

    Christine Dull
    Top SubjectReal Estate Investments

    January 19, 2022 at 2:01 pm

    Ok I guess we are still confused as to whether we need a “self-directed IRA” vs a “solo 401k”.

    For all practical purposes, this is his IRA money. He does not have his own business. He works for a company and has a W2 from the company. He is not self-employed.

    We want to use the IRA funds to purchase the property. So will the new account just need to be a “self directed IRA”? He will not be using it like a 401k account where he will be making annual contributions to a self-employed IRA. He will be transferring the funds from his traditional IRA at Wells Fargo to a new IRA account with you where he will purchase the property.

    Can you please help clarify? Thanks

    Christine Dull
  • Top SubjectReal Estate Investments
    Top ForumsReal Estate Investments

    Christine Dull
    Top SubjectReal Estate Investments

    January 21, 2022 at 9:49 am

    Thanks for the clarification. We are planning to go forward with the self-directed IRA and will work with you to set up the IRA LLC.

    I understand the fee is $800 – can you clarify if that is all we will be paying to your company to set this up? What does that fee cover? Will that include all paperwork for filing the LLC and establishing the custodial account with Forge Trust?

    I understand there will also be fees to the state and fees directly to Forge Trust – just trying to understand what the $800 set up fee covers.

    Thanks!

    Christine Dull
  • Top SubjectReal Estate Investments
    Top ForumsReal Estate Investments

    Christine Dull
    Top SubjectReal Estate Investments

    January 24, 2022 at 10:09 am

    Sorry one final question before I send the payment in today.

    Our plan is to purchase a plot of land for investment through the self-directed IRA. In a few years, if we decide we would like to purchase the lot personally, out of our own funds, can we buy the lot from the LLC? Is there any problem purchasing the lot ourselves, rather than an outside buyer purchasing it?

    Christine Dull
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