I’ve read your information on BiggerPockets and like that your company business model is based on Biblical financial principals. I’m currently trying to educate myself about real estate investing and gathering my assets in the best possible scenario for increasing our chance for financial freedom. I have few questions about Solo 401k. Here is my plan:
1. My husband works two jobs: Firefighter/paramedic & loan officer. I’m a stay-at-home mom but I’m about to start investing in real estate. I understand that I need an LLC or a RIN # in order to initiate a solo 401k.
2. I have $24,000 in IRA and $47,000 in my state retirement fund from when I worked there 11 years ago. I want to know if my retirement fund can be rolled into the Solo 401k? I also want to know if there is a seasoning period or waiting period once the funds are rolled in before I can use them. I read something about a two year holding period or something like that with certain funds.
3. Also, do I understand that I can manage the rental properties myself without penalty within the solo 401k? I would be trying to find a non-recourse loan to acquire about 4 rental properties within the 401k. I know that I can only borrow up to 50% of the value of the 401k so that would be a loan amount of $36,000. But couldn’t I have four loans? One for each rental? each one at no more than $36,000?
1. You don’t need an LLC in order to start a Solo 401k. What you need is the legitimate self-employment activity and the absence of full-time employees working for any business that you own. For details please see: Solo 401k Eligibility
2. You can rollover any qualified retirement plan into Solo 401k with one exception: Roth IRA. Your Traditional IRA can be rolled over into Solo K for sure. I suggest you contact plan administrator for your state retirement fund and ask if those funds can be rolled over into another qualified fund. If the answer is ‘yes’ – then you can move them into Solo 401k. As soon as you move funds over into your new plan you can start using them immediately, there is no waiting period.
3. The question about managing property owned by your Solo 401k plan comes up often and we already addressed it before HERE. The 50% rule applies to Participant Loan, it does not apply to the non-recourse loan that your 401k is getting when acquiring investment property. We work with several lenders who offer non-recourse financing, typically you need 30-50% down for each property, plus you need to show sufficient reserves in your retirement account. Also there is minimum loan amount with each lender, please contact them directly to inquire about the details of their programs.