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.