How,Invest,Real,Estate,with,So finance, share, loan How to Invest in Real Estate with a Solo 401k
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For more than the past century, real estate has had consistent growth. This has made it a go-to investment for investors everywhere and an important part of any thriving economy.However, while real estate investing is well-known, the benefits of using a retirement account for investing in real estate– especially a Solo 401k– are not. Why should I use my Solo 401k to invest in real estate?If you purchase real estate your own personal funds, you’re going to have to pay federal and state income tax on the gains.However, if you purchase real estate with a retirement account like an IRA or 401k, the gains are not subject to taxation until they’re removed from the account, meaning you can immediately reinvest those gains into your Solo 401k without taking that initial tax hit.That’s a great reason to invest in real estate with a retirement account, but what’s so special about a Solo 401k?With a Solo 401k, you get access to several significant features that make investing in real estate easier, more profitable, more hassle-free: No custodian: An IRA must go through a custodian for all real estate transactions– a Solo 401k doesn’t because you serve as trustee of your own account. This results in less hassle but also saves you money on custodian fees. Exempt from UDFI: When financing a real estate purchase with an IRA, the gains on that property will be hit with the UDFI (Unrelated Debt Financed Income) tax. This is a hefty tax with rates as high as 40%. However, with a Solo 401k you’re not subject to UDFI tax. Non-recourse business loans: With NRB loans, you’re able to protect your Solo 401k assets from being touched while investing in real estate. This, combined with the previous points, makes the Solo 401k ideal for investing in real estate.But how do you go about investing in real estate with a Solo 401k?How to invest in real estate with a Solo 401kYou can invest in real estate with your Solo 401k by following these steps: 1. Open and fund your Solo 401k accountFirst, set up your Solo 401k account and make the initial deposit that you’ll use as a down payment later. This can be done through several different methods, including:A contributionIRA or other qualified plan rollover (such as a 401k or 403b) 2. Decide purchase methodThere are several options for purchasing real estate with a Solo 401k. These options include:Cash purchase: All cash purchase with no loan. Tenants-in-common purchase: Tenants-in-common (or TIC) is a cash purchase where a portion of the funds are personal so that both you personally and your Solo 401k own a percentage in the property. Non-recourse business loan: As discussed earlier, this is a loan option that protects your Solo 401k assets in the case of a default. 3. Make an offer Once you’ve set up and funded your account and you know how you’re going to make the purchase, the rest of the process is essentially the same as any real estate transaction.Once your offer has been accepted, you’ll complete the closing process by signing and submitting all purchase-related documents to the escrow agent along with a check for the deposit or purchase amount.Once you’ve done this, you’ve completed your first Solo 401k real estate investment!Real estate investing made easy with a Solo 401kWithout a doubt, the Solo 401k is an ideal vehicle for investing in real estate simply and easily. Whether you’re looking to invest in rentals or flip properties, use the power of a Solo 401k to your advantage to reduce the hassle of investing in real estate while maximize your return.
How,Invest,Real,Estate,with,So