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Invest in Real Estate Tax-Free with a Solo 401k

Did you know that funds in a 401K account may be invested in real estate? They can! Many people don’t realize that. That is because 401K accounts are traditionally set up with financial institutions that have the incentive to invest such funds in stocks, bonds and mutual funds due to, among other things, higher commission fees. On the other hand, if you are eligible to set up a Solo 401K, you will have “checkbook control” and will be able to invest such funds in real estate in addition to stocks, bonds and other traditional securities. The same, incidentally, is true for a Self Directed IRA, Self Directed Real IRA and a Self Directed Roth IRA.

Deciding between a Self Directed IRA and/or a Solo 401K Plan

For most sole proprietorships and small business owners, selecting a retirement plan that best fits ones retirement and tax objectives is an important decision that merits careful consideration. Both the Self Directed IRA LLC and the Solo 401K Plan offer individuals the ability to make traditional as well as non-traditional investments, such as real tax-free and without custodian consent.

Facing a Financial Shortfall – The Solo 401K Plan May be your Answer

Over the last several years, hundreds of thousands of Americans have been impacted by the downturn in the U.S. economy and the tightening of the U.S. credit markets. As a result, many Americans have been placed in a difficult financial position faced with increasing financial pressures. Fortunately, Internal Revenue Code Section 72(p) allows a Solo 401K Plan participant to take a loan from his or her 401K Plan so as long as it is permitted pursuant to the business’s 401K Plan documents.

Why Using a Self-Directed IRA LLC with “Checkbook Control” will Save you Money

A number of IRA custodians advertise themselves as offering a Self Directed IRA, but what they are disclosing is that you will need to seek their approval before making an investment with your IRA.
1. Self-Directed IRA Without “Checkbook Control”
With a custodian controlled Self-Directed IRA without “Checkbook Control”, most types of nontraditional investments, such as real estate are permitted, however, the consent of the custodian is required in order to approve the investment. This typically results in long delays and high custodian fees associated with the transaction. For example, it is common for a moderately active investor with $125,000 in assets with a Self Directed IRA custodian without checkbook control to end up paying from $800 to $1300 in aggregate annual fees (i.e. account value fee, transaction fees, approval letters).
Moreover, there is no guarantee that the custodian will approve the Self Directed IRA or Self Directed Roth IRA investment even though the investment would not violate Self Directed IRA rules.