Real Estate

What makes the Self-Directed Solo 401(k) so powerful for real-estate?

The Solo K at Rocket Dollar allows you up to $57,000 in Traditional or Roth tax savings, loans, and the ability to invest directly into individual property or real estate funds of your choosing, all while using leverage.

Invest in what you know. Move parts of your portfolio you are unsatisfied with into your  Real Estate area of expertise!

With a Rocket Dollar Account, you can invest in things like second or multiple investment properties in your community, rental vacation homes, multifamily, apartments, commercial property, mobile homes, raw land, natural resources, and more!

You can also mix in retirement account hard money loans and promissory notes to other trusted investors in the real estate community!

As long as you aren't committing a prohibited transaction, which is crossing interests of your family or personal business between your retirement account, you can invest in almost everything! 

The Solo 401(k) Structure

We set you up with an IRS pre-approved plan document, which establishes a retirement trust. You have full "checkbook control" as the Trustee of the plan. Bank accounts at our partner bank allow you to send wires, checks, debit card transactions, and ACH to manage your properties. 

With a Rocket Dollar Gold Account, you automatically get a custom checkbook and debit card included with your bank accounts. 

If you want, you can create an LLC entity in between each property for extra protections or coordination between related retirement investments!

Real Estate Solo K

 

Tax Savings Flexibility 

The solo 401(k) allows for personal contributions and business contributions. Rental Income doesn't qualify, but any self-employed income will! If you are only paying yourself with rental income, then maybe consider visiting a CPA or rethinking your payment structure to be able to supercharge your retirement account. 

Your personal contributions can be Traditional (post-tax) or Roth (pre-tax). Roth Dollars are highly desirable for financial planning because of low tax rates right now, and you can even do Mega-backdoor Roth Conversions to build very powerful Roth Conversions. 

High Contribution Limits

 

The Solo 401(k) is one of the most potent retirement accounts to build up contributions quickly! This retirement plan is perfect if you are a high real estate earner looking for tax savings, which you can then build up to target specific real estate properties. 

 

2020 if you are under 50: $19,500 for a Traditional deferral or Roth personal contribution, $37,500 for a profit-sharing/employer contribution. $57,000 limit.

 

2020 If you are over 50: $26,000 for a Traditional deferral or Roth personal contribution, $37,500 for a profit-sharing/employer contribution. The $6,500 in catch up contributions do not count against the $57,000 limit. (all in total 63,500)

You can read more here. 

Loans to yourself

You can lend to yourself from your retirement plan. There are no restrictions where this money can go! Unlike lending to someone else or investing in a property through a retirement account, loan money comes out as standard cash, and then you pay your retirement account back with interest. As long as you give yourself a market rate, you can pay your retirement account back quarterly, in as slow as five years. 

You can take out up to $50,000 or half of your retirement account balance, whichever limit you hit first 

Utilize hard money lending. With no UDFI!

Real estate in Self-Directed accounts has been incredibly popular for a while, but new investors sometimes get warry of certain taxes they are unfamiliar with, like UBIT and UDFI. Passive investments are usually spared from these taxes, but Self-Directed IRAs can be subject to UDFI (Unrealized debt-financed income) for taking on large amounts of debt and hard money loans. 

The great news is that the Solo 401(k) is exempt from UDFI, or taxes imposed on lenders. Don't even worry about it!

 

                          Read more about our Self-Directed Solo 401(k)