An individual 401 k plan offered by a company such as My Solo 401k Financial is one of those plans that allows investing in real estate. Make sure to first open a self-directed 401k solo. The offer to purchase real estate must be made in the name of the 401k plan alone. Self-employed 401k will purchase the property and, to comply with the regulations, ALL fees (including escrow) must be paid with individual 401,000 funds.
Of course, you don't need an LLC for your self-directed 401 (k) plan to purchase real estate. The Solo 401 (k) plan itself can take title to the property. In other words, the plan may own the property. If the Solo 401K plan documents allow it, then yes, you can use it to invest in real estate.
A Solo 401K is also known as a self-directed 401K. For a Solo 401K plan, the IRS lists approved investments. Under ERISA, or the Employee Retirement Income Security Act (197), certain rules apply to investments in retirement plans. Those rules include that you cannot invest in art, gems, antiques, coins and other collectibles or alcoholic beverages.
While investing in precious metals is allowed, if you meet the requirements described in Section 408 (m) of the IRC. Under the IRS's prohibited transaction rules, a retirement account holder who wishes to use leverage to purchase real estate can only use a no-recourse loan from a non-disqualified person, such as a bank. A no-recourse loan is a loan that is not personally guaranteed by the borrower. As a result, a retirement account holder can use a no-recourse loan to purchase real estate.
However, unlike almost any other investment in a retirement account, the tax treatments used when using a no-recourse loan for an IRA and a 401 (k) plan are significantly different.