ForumsReal Estate InvestmentsSolo 401k investment in LLC which owns real estate

Forums Solo 401k Real Estate Investments Solo 401k investment in LLC which owns real estate

  • Solo 401k investment in LLC which owns real estate

    3 Replies
  • Top SubjectReal Estate Investments,Solo 401k – 5500-EZ
    Top ForumsReal Estate Investments, Solo 401k – 5500-EZ

    Mike Grossman
    Top SubjectReal Estate Investments,Solo 401k – 5500-EZ

    September 25, 2021 at 5:07 am

    With a solo 401k investment into real estate:

    If the investment is an all cash purchase, the property will be titled in the name of the solo 401k. I understand under the ERISA rules the property must be for a rental. Is this correct?

    If a single member LLC is formed and the property is purchased by the LLC, the property will be titled in the LLCs name. If the solo 401k invests in the LLC, does the property still need to be strictly a rental property?

    If so, what if the LLC is a multi member LLC in which the solo 401 k is a 50% member or 49% member?

    In regards to the operating agreement of the single member LLC, I understand it would need to be drafted as a Special Purpose Solo 401(k) LLC Operating Agreement, outlining both the Solo 401(k) rules and IRS rules. However, if it is a multi member LLC in which the solo 401 member owns 50% of the LLC and a non-disqualified person owns the other 50%, does the operating agreement still need to include language surrounding investing and the 401(k) regulations?

    Mike Grossman
  • Mark Nolan

    Top SubjectSolo 401k,Rollover Funds into Solo 401k
    Top ForumsSolo 401k, Rollover Funds into Solo 401k

    Mark Nolan

    Mark Nolan

    Top SubjectSolo 401k,Rollover Funds into Solo 401k

    September 25, 2021 at 1:59 pm

    1. You are correct.

    2. In addition to the property owned through solo 401k LLC being rented out, it may also be a buy and hold.

    3. Same as above if the solo 401k is a 50% or less member.

    4. No necessarily unless the solo 401k participant will also be the manager.

  • Top SubjectReal Estate Investments,Solo 401k – 5500-EZ
    Top ForumsReal Estate Investments, Solo 401k – 5500-EZ

    Mike Grossman
    Top SubjectReal Estate Investments,Solo 401k – 5500-EZ

    September 26, 2021 at 6:01 am

    Thanks Mark,

    In #2, a buy and hold could mean undeveloped land, fixer upper and sell, etc.?

    In #4, so if participant is a manager and owns any amount of the LLC interest, then need to include the language in the OA. Do you offer an operating agreement, or the language which should be included in the operating agreement would satisfy the requirements?

    Mike Grossman
    • Mark Nolan

      Top SubjectSolo 401k,Rollover Funds into Solo 401k
      Top ForumsSolo 401k, Rollover Funds into Solo 401k

      Mark Nolan

      Mark Nolan

      Top SubjectSolo 401k,Rollover Funds into Solo 401k

      September 26, 2021 at 4:31 pm

      2. If a solo 401k invests in an LLC that flips real estate consistently it could subject the solo 401k to (Unrelated Business Income Tax (UBTI).

      4. We do not, but do draft operating agreements for a fee for single member LLC’s where the sole member is the solo 401k. Click here to learn more.

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