Solo 401(k) Plan leverage solution offers real estate investors ability to use leverage without tax for real estate deals
IRA Financial Group, the leading provider of Self-Directed IRA and Solo 401(k) Plans, launches Solo 401(k) plan leverage solutions for real estate investors. You can generally obtain financing through a loan or mortgage. This helps many individuals purchase real estate or flip homes by using a solo 401(k) plan. However, the loan has to be non-recourse.
The Non-recourse Loan
A non-recourse loan is one that is secured by a form of collateral, such as property. With a non-recourse loan, the lender can take the collateral the borrower used to secure the loan. However, if the collateral isn’t enough to pay off the debt, the lender must absorb the difference.
A non-recourse loan is not a traditional mortgage, according to the IRS prohibited transaction rules. The 401(k) plan participant cannot personally guarantee the loan.
“We have seen an increase in demand from real estate investors looking to use leverage with their retirement funds to flip homes or do real estate transactions without paying tax, as in the case of using a Self-Directed IRA,” stated Adam Bergman, President of the IRA Financial Group.
According to Bergman, “The advantages of using a Solo 401(k) Plan to purchase real estate is that a non-recourse loan can be used which could help leverage the property without triggering any tax or penalty. In contrast, if using a self-directed IRA to purchase real estate, a tax would be imposed on the debt-financed portion of the property being purchased, which could be as high as 37%. Pursuant to Internal Revenue Code Section 514(c)(9), the Unrelated Business Income Tax (UBTI) would not apply when using non-recourse leverage as part of a Solo 401(k) real estate transaction. In other words, real estate investors can buy more real estate with their retirement funds with the hopes of generating a greater amount of tax-free income and gains.”
The Self-Directed Solo 401(k) Plan
IRA Financial Group’s Self-Directed Solo 401(k) plan is unique and so popular because it’s specifically for small, owner only businesses. With IRA Financial Group’s Solo 401(k) plan, self-employed individuals or small business owners with no employees can benefit by making high annual contributions – up to $55,000. There’s an additional $6,000 catch-up contribution for those over age 50. Employees can also make traditional and non-traditional investments, like real estate. Additionally, they can borrow up to $50,000 or 50% of their account value tax-free and penalty free.
IRA Financial Group is the market’s leading provider of self-directed retirement plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate, cryptocurrency, and private business investments.
Adam Bergman, IRA Financial Group partner, has written seven books the topic of self-directed retirement plans, including, “How to use Retirement Funds to Purchase Cryptocurrencies”, “The Checkbook IRA”, “Going Solo,” “Turning Retirement Funds into Start-Up Dreams”, “Solo 401(k) Plan in a Nutshell”, “Self-Directed IRA in a Nutshell”, and “In God We Trust In Roth We Prosper”.