Real Estate Financing for the Solo 401k

When purchasing properties, one question an investor often asks is if the purchase should be completed with all cash or utilizing financing.

If you are looking for financing for an investment that will be owned by your Solo 401k, to comply with laws and regulations it must be a non-recourse loan.

A non-recourse loan is a loan secured only by the property as collateral, with no personal guarantee.

The reason the loan must be non-recourse is a Solo 401k participant cannot personally guarantee a loan for the 401k. Also, the other assets of the borrower (the Solo 401k) cannot used to secure the loan.

With a non-recourse loan, ff there’s a default, there is no recourse to collect the loan from the Solo401k owner personally or the Solo 401k itself other than to foreclose on the property.

Since this is a special type of loan, with higher risk to the lender, the down payment is usually larger and it’s typical for Solo 401k to put down 30-50%.

For a non-recourse lender -...

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How to Take a Solo 401k Participant Loan

Each Solo 401k by Nabers Group automatically includes a participant loan, where you can take a personal line of credit of up to $50,000.

What is a Participant Loan?

A Solo 401(k) participant can borrow up to either $50,000 or 50% of their account value with the following terms:

  • To be repaid over an amortization schedule of 5 years or less
  • Regular payments no less frequently than quarterly
  • At a reasonable rate of interest… generally interpreted as prime rate + 1%

Under what conditions is the participant loan allowed?

Any. As long as the plan documents allow for it & the proper loan documents are prepared and executed, a participant loan can be made for any reason.

Why Would You Want a Participant Loan?

This can be useful when someone is thinking about distributing money out of their Solo 401k plan for some reason. We recently spoke with a a man who was going to distribute his $100k IRA to pay for finishing the repairs of 2 fixer upper houses. After we spoke,...

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How to Invest in Promissory Notes with the Solo 401k

Promissory notes can be a profitable way to make investments with the Solo 401k account. The investment is simple, and easy to execute with your retirement plan. As with any self-directed Solo 401k investment, you are the trustee of your 401k plan and thus have the control to establish the note terms, including the interest rate and repayment date of the loan.

For some investors who want to dabble in real estate, but might not be ready to purchase a property outright – the promissory note can be an excellent way to get started.

In fact, many larger corporations have long invested their pension funds into promissory notes, as a way to maintain some liquidity while garnering handsome returns.

What is a promissory note?

A promissory note is a signed document between two parties that contains a written promise to pay an agreed-upon sum, at a specified date. In simpler terms, a promissory note is a promise to pay or an IOU. 

What are the different kinds of promissory...

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Do I Need a Third Party Administrator for the Solo 401k?

A Solo 401k plan is surprisingly easy to administer. With the Solo 401k plan by Nabers Group, you do not need a third party administrator. In fact, you are allowed to act as your own administrator. Read on to learn about the roles and duties of a 401k plan administrator and how you can make it work for your retirement plan.

What is a 401k Plan Administrator?

An administrator is the individual or entity who handles the administration of an employer-sponsored plan like the 401k. The 401k administrator is often hired by the 401k plan sponsor to handle the day to day activities and reporting of the 401k plan.

With a Solo 401k plan, your business it the plan sponsor. Therefore, your business can choose who will be the Solo 401k plan administrator. To keep record-keeping clean and easy, and to cut the fat of extra costs, most Solo 401k accountholders will act as their own Solo 401k plan administrator.

A 401k plan administrator will often handle the plan...

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Who is the Trustee and Custodian of the Solo 401k?

This wonderfully straightforward question has a very twisty answer.  After all, retirement plans are anything but dull.

First, a bit of referential background to establish our foundation:

While the two retirement plans are often similar, they have some distinguishing characteristics that change the operation of each plan drastically.

First, let's define an important term:

A custodian is a person or entity with fiduciary responsibility over assets. Depending on the situation, a custodian might simply be a bank or brokerage account, or it can be defined as someone who has fiduciary responsibility, or authority, over assets. 

With respect to IRA plans, the Internal Revenue Code is very clear there needs to be a...

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Real Estate and the Solo 401k

When you purchase Real Estate, a holding institution such as a custodian can create delays and red tape that can kill profitable deals before you get the profit. Instead of days or weeks of third party processing, we empower you to finalize deals with the ease of signing a check.

Go beyond publicly available REITs and access investment properties directly. You can invest your 401k funds into houses, condos, land, mortgage notes, and more! Let the gains, rents, any all profits go back into your Solo 401k without taxation. Our Unlimited® platform gives you the freedom to invest in virtually any real estate deal, whether it be a rental home, a bargain at the foreclosure auction, or a syndicated “insider” real estate development.

Real Estate has long been the darling of the self-directed investing industry.

Starting in the early 1980's, IRA investors began using their retirement funds to invest in real estate. This opened a whole new world of investing possibilities as...

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2017 Updated 5500-EZ Guide

What is form 5500-EZ?

Form 5500-EZ is an information-only form that is completed and filed by 401k plan administrators. As your own Solo 401k plan administrator, completing and filing this form is part of your responsibility in running your Solo 401k plan.

From the IRS: "Form 5500-EZ is used by one-participant plans and foreign plans that are not subject to the requirements of section 104(a) of the Employee Retirement Income Security Act of 1974 (ERISA) and that do not choose to file Form 5500-SF electronically to satisfy certain annual reporting and filing obligations imposed by the Code." (Source)

In other words, the 5500-EZ form is used to report your Solo 401k annual holdings.

When is form 5500-EZ due?

The 5500-EZ  is due by July 31st but only if your Solo 401k plan had $250,000 or more in assets at the end of the calendar year last yeat.

Example: If on December 31st, 2017 your Solo 401k had $250,000 or more in total assets, then you would file your form 5500-EZ by...

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Crypto Education Series: Bonus - Bitcoin FAQ

In this 3-part educational series, we'll discuss bitcoin and other cryptoassets, including background on the exciting new asset class, how your Solo 401k plan can hold crypto compliantly, and the tax advantages of using your Roth Solo 401k plan to grow your gains tax-free.

Our bonus post answers some of the most frequently asked questions about buying bitcoin in your Solo 401k.

Who is eligible to open a Solo 401k plan with Nabers Group (and then buy crypto in the Solo 401k)?

There are two elements to qualify for the Solo 401k:

  1. Presence of self-employment business activity
  2. Absence of full-time W2 employees

In the Information Age, almost anyone can qualify for the Solo 401k. If you don’t already have a small business of your own, consider starting one! You can start a business from home, with almost no time or capital requirement. Nabers Group clients include weekend Uber drivers (who have a full-time “regular” job), stay-at-home-Moms who do some virtual assistant...

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Crypto Education Series: Part III - Grow Your Gains Tax-Free with Roth Solo 401k

In this 3-part educational series, we'll discuss bitcoin and other cryptoassets, including background on the exciting new asset class, how your Solo 401k plan can hold crypto compliantly, and the tax advantages of using your Roth Solo 401k plan to grow your gains tax-free.

Our third installment discusses how to grow your wealth tax-free using the Roth Solo 401k.

The Roth 401k was born in 2006 (along with the Solo 401k). A provision in  the Economic Growth and Tax Relief Reconciliation Act of 2001 sought to create a structure that was similar to a Roth IRA for 401k accountholders. This special retirement account has long been a favorite among self-directed investors who want to grow their wealth tax-free. This can be an especially lucrative strategy if you are making an investment you know could skyrocket in value.

For example, the crypto veterans at Nabers Group began investing in bitcoin in early 2013. We expected the investment would pay off so we decided to put some of...

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Crypto Education Series: Part II - Bitcoin In Your Solo 401k

In this 3-part educational series, we'll discuss bitcoin and other cryptoassets, including background on the exciting new asset class, how your Solo 401k plan can hold crypto compliantly, and the tax advantages of using your Roth Solo 401k plan to grow your gains tax-free.

Part II of our series discusses holding bitcoin and other cryptocurrencies inside your Solo 401k plan.

Can your retirement account own crypto?

Yes! Cryptocurrency and other crypto assets are allowed inside of the retirement accounts just like gold, real estate, stocks, bonds and ETFs.

IRS Thoughts on Cryptocurrencies

The IRS released notice 2014-21 on March 25, 2014 where they state they don’t exactly treat cryptocurrencies like currency, but rather more like property (real estate). This sparked a long debate between the Securities and Exchange Commission (SEC) and the Commodities & Futures Trading Commission (CFTC) on whose domain crypto assets fall.

In notice 2014-21, the IRS states, “virtual...

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