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Are you thinking about using your Solo 401K to purchase multifamily properties? In 2020, many investors are getting started with purchasing multi-family properties with their Solo 401K’s.

Even though this is a popular method for getting started with investing in real estate, the reality is that some Solo 401K’s don’t allow the funds in the 401K to be used for purchasing real estate.

Before you move forward with utilizing your 401K to buy a multi-family property, you must verify with your plan provider that your 401k will allow it.

As with most individual retirement accounts (IRAs), there are a wide variety of things that you can and cannot invest in with your solo 401k. Some of the things that you cannot use your investment account to purchase include gems, art, collectibles, antiques, or alcoholic beverages.

Although most Solo 401K’s have specific requirements, the good news is that you can utilize your account to purchase more than just real estate since some Solo 401K accounts can be used to purchase precious metals as long as they have been confirmed to meet specific requirements.

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Tips For Using Your Solo 401K To Buy Multifamily Real Estate

If you read my last article on how to purchase real estate with your self-directed Individual Retirement Account (IRA), you know that there are a wide variety of regulations that you must follow if you want to effectively utilize the funds in your retirement account to purchase Real Estate.

The same is true when using a Solo 401K purchase of a multi-family property. One of the first rules that you have to be aware of is that you cannot live in the property that you purchase with a Solo 401K.

Why? Under the rules and regulations of a Solo 401K, you would technically be classified as a “disqualified person” because, you are an owner, or employee, who participates in the 401K, so you, your spouse, relatives, ancestors or anyone who’s in your family line cannot live in or use the property that you purchase with your Solo 401k.

A “Hands Off Investment”

If you’re a long-time investor like me, you know that there may be some investments that you’ve made over the years which are classified as “hands off”. The multifamily property that you purchase with your Solo 401K will be considered to be a hands-off property.  

Any form of maintenance or “sweat equity” of your multifamily property that you attempt to do yourself would be breaking the rules of your Solo 401K so it’s best to always outsource the maintenance and management of your multifamily property.

Travel Expenses Can’t Be Paid For By The Solo 401K

Is the multifamily property that you plan on purchasing with your Solo 401k located out of the city or town in which you are currently living in? If so, there’s no denying that you’re going to have to travel to that property to check it out in person but, you must also know that you cannot utilize the funds from your Solo 401k for your travel expenses.

Buying An Overseas Property Using Your Solo 401K

If the property that you plan on purchasing with your Solo 401K is located overseas in a country like Costa Rica, you can purchase those properties since the 401K will function the same way as it does in the United States but a I mentioned above, you must pay any travel or expenses to the property.

Keep in mind that when buying multifamily, or any other form of real estate abroad, local rules do apply so it’s always best to connect with a locally based attorney to help you navigate this process.

investing in real estate with sep ira

Can You Buy Property From Your Solo 401K?

During the years that you own your multifamily property through your Solo 401K, you may at some point wonder if you can purchase one or more properties from your 401K plan.

Sadly, even though this may seem like something that you should be able to do, this is also prohibited since the participant or owner of the Solo 401K plan is prohibited from selling or leasing property from the plan.

You also cannot use a third-party purchaser of the property for you, in a roundabout way. These types of deals are classified as “straw-man” transactions and are not allowed by the rules and regulations of your Solo 401k.

Inherited Tenants

Can You Transfer Property From Your IRA To Your Solo 401K?

If you currently have a property in your Individual Retirement Account (IRA), you may also be wondering if you can transfer property that’s owned by your IRA to your Solo 401K?

The answer to this question is yes. In most cases, IRA rules do allow for properties that are owned by a Self-Directed Individual Retirement Account to be transferred from that account over to a Solo 401k.

This transaction would of course have to be handled by an investment professional because there are transfer rules and other regulations that you need to be aware of with this process.

Invest In Multifamily Properties With Trier Capital

At Trier Capital, we save investors the time, money, and hassle of investing in multifamily properties themselves because our team has developed a proven method to help investors invest smarter and ultimately retire earlier while living life on their terms.

Even though multifamily properties are an excellent investment, the process of getting started with buying your first property can take off a lot of time and effort, especially if you plan on managing that property yourself.

Thankfully, you can depend upon my team for sourcing, acquiring, and managing multi-family properties in the United States. This will save you the hassle of having to do any of the heavy lifting yourself and you can have confidence that the property will be professionally managed for you as well so all you have to do on a monthly basis is wait for the dependable cash flow from your property to come in.

To learn more about the services that we can offer you, contact me today by calling (630) 229-2383 or click here to connect with me online.


Erik Hatch

Erik is currently invested in projects in Florida, Texas and Kentucky totaling $79 Million. He is an accomplished leader who motivates and inspires action while at the same time, is grounded in business metrics and information that drives successful businesses.