Real Estate Investments with a Solo 401k plan

Once a Solo 401k plan is set up, the plan owners have the opportunity to select investments for their plan. Real estate is one of the available options. The question is, when is a good time to enter the market?

According to KTAR News, the right time to purchase real estate is right now.

The housing bubble burst was five years ago, and the pessimistic sentiment have died down. Real estate is gaining popularity again among investors as a promising field. Real estate price, according to the article, is now rising quickly, even approaching record levels in some areas.

The rising real estate price presents opportunities for all investors, including the Solo 401k plan owners. Unlike other traditional retirement plans, the Solo 401k plan is allowed to hold properties and other real estate investments, among many alternative assets.

Typically, the plan owners of a Solo 401k plan would invest their funds in a rental property or mortgage notes. The plan will then collect monthly rent or interest payments as returns on the investment.

With the rising estate price, plan owners stand the chance of profiting from capital gains as well if they choose to sell the property later. Depending on the capital gain, having the property shelter within a Solo 401k can offer a huge tax benefit.

All capital gains, along with the rental or interest payments, are on a tax-deferred basis within a Solo 401k plan. Plan owners can also choose to use their Roth Solo 401k account to acquire the property. In this case, any gain from the property will become tax-free.

This tax benefit allows plan owners the chance to grow their retirement funds much quicker. With the real estate price on the rise, it’s a good time for Solo 401k plan owners to consider a real estate investment.

Aside from the tax benefits, the Solo 401k plan offers many flexibility and control to plan owners, which proves to be beneficial for real estate investments. The Solo 401k plan is not required by the IRS to have a third-party custodian. The plan owner can act as the trustee of the plan, and therefore, gain total control of the funds. This allows the plan owner to quickly capture a deal when the opportunity presents itself.

The plan also offers one of the highest contribution limits among qualified retirement plans. The total limit, including salary deferral and profit sharing contributions, is $53,000 annually as of 2015. With the high contribution limits, the Solo 401k account can accumulate funds faster for real estate purchases.

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