IRA Financial Group Solo 401(k) Plan Investors Turning to House Flipping Game in Growing Numbers, According to IRA Financial Group

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Ability to use leverage without tax for real estate deals making Solo 401(k) Plan popular among house flipping investors

Ability to use leverage without tax for real estate deals making Solo 401(k) Plan popular among house flipping investors

Because home prices have risen steadily since 2012 and new construction hasn’t flooded the market with inventory, many self-employed house flippers have turned to the self-directed solo 401(k) plan as a vehicle for financing their real estate transactions

IRA Financial Group, the leading provider of self-directed IRA LLC and Solo 401(k) Plans, has 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. In general, one is permitted to obtain financing through a loan or mortgage to purchase real estate or flip homes by using a solo 401(k) plan so long as the loan is nonrecourse. A nonrecourse loan is not a traditional mortgage as due to the IRS prohibited transaction rules, the 401(k) plan participant cannot personally guarantee the loan.

Borrowers of residential transitional loans—or flip loans, as they are better known—use the money to buy a property, renovate it and then try to quickly resell at a profit. They have become a lucrative industry in recent years. “Because home prices have risen steadily since 2012 and new construction hasn’t flooded the market with inventory, many self-employed house flippers have turned to the self-directed solo 401(k) plan as a vehicle for financing their real estate transactions,” stated Adam Bergman, a partner with the IRA Financial Group.

The advantages of using a self-directed 401(k) Plan to purchase real estate is that a nonrecourse loan can be used which could help leverage the property without triggering any tax or penalty. In contrast if using a self directed IRA LLC to purchase real estate, a tax would be imposed on the debt-financed portion of the property being purchased. Pursuant to Internal Revenue Code Section 514(c)(9), the Unrelated Business Income Tax (UBTI) would not apply when using nonrecourse leverage as part of a real estate transaction (unrelated debt-financed income – UDFI). “Using nonrecourse financing with a solo 401(k) plan offers home flipping investors the ability to use leverage without having to pay tax,” stated Mr. Bergman.

IRA Financial Group’s solo 401(k) plan is unique and so popular because it is designed explicitly for small, owner only business.  With IRA Financial Group’s solo 401K plan, self-employed individuals or small business owners with no employees can benefit by making high annual contributions – up to $55,000 - with an additional $6,000 catch-up contribution for those over age 50, make traditional as well as non-traditional investments, such as real estate, as well as 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 IRA & Solo 401(k) 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.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

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Jaclyn Baily
IRA Financial Group
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