That’s right, if you are self-employed, you can invest directly in real estate—and Raleigh is a great place to do it! Let’s dive right into how to do just that with the help of Solo 401k by Nabers Group.
First Things First, What is a Solo 401k?
A Solo 401k is a retirement plan for the self-employed. This type of 401k is for freelancers, small business owners, and independent contractors. Your small business can be a sole proprietorship, formally LLC, C Corp, or S Corp. You are eligible for a Solo 401k if there are no outside full-time common-law employees in any business owned by you and/or your spouse. You can see if you qualify at Solo401k.com.
Investing in Real Estate With a Solo 401k
Starting in the early 1980s, IRA investors began using their retirement funds to invest in real estate. This opened a new door for those wanting to purchase tangible assets instead of only being tied to the stock market. With the advent of the IRA LLC structure, accountholders were to hold properties directly in an LLC they managed. The IRA LLC structure was won in tax court in 1996, proving that retirement accountholders should be able to directly control where and how they wanted their retirement funds invested. The Solo 401k was born in 2006 and allowed users to self-custody the funds and assets, eliminating the need for a custodial middleman. Now, accountholders were buying properties directly titled in the name of the Solo 401k trust of which they were the trustee.
What Does All This Mean?
To sum it up, with a Solo 401k, you can invest your 401k funds directly into condos, houses, land, mortgage notes, and more! Then, you can let the gains, rents, and any other profits you make go directly back into your Solo 401k without taxation.
Solo 401k Best Practices by Nabers Group
Here are a few best practices the Nabers Group has compiled when it comes to investing in real estate in this manner.
- Do not live in the property as this would be a prohibited transaction.
- Family members are also prohibited from living in the property.
- Do not perform any work on the property yourself. Hire an unaffiliated third party to perform any repairs.
- Hire an unaffiliated third party to manage the property.
- Deposit rent checks into your 401k trust bank account, not a personal or business account.
- Pay for any expenses or repairs with the 401k trust bank account.
- Your Solo 401k cannot purchase a property you own.
Learn more about real estate and the Solo 401k at Solo401k.com.
Source: Sol0 401k by Nabers Group.
Ready to Invest?
I have had many self-employed clients purchase real estate in this way to make a profit and I would love to help you do the same. Contact me today at 919-961-3277 or Annie@HudsonResidential.com if you have any questions about this topic or to start your investment property search!