Solo 401k Real Estate Flipping: How It Works

Flipping houses typically requires a lot of cash. But what if you could use your retirement savings instead? 

A Solo 401k offers self-employed investors a way to buy and flip real estate, with the potential for tax-deferred growth. While no investment is guaranteed, using a Solo 401k for flipping may provide higher contribution limits and greater control compared to other retirement plans.

This guide will walk you through how it generally works, what to watch out for, and key steps to get started.

Why Use a Solo 401k for House Flipping

Flipping houses typically requires significant upfront cash, and tapping personal savings isn’t always ideal. For self-employed individuals, a Solo 401k can offer another path. While no investment is without risk, flipping real estate through a Solo 401k may provide tax advantages and more flexibility than traditional retirement plans.

Here’s a closer look at the key advantages:

✅ Potential Tax-Deferred or Tax-Free Growth

Flipping real estate inside a Solo 401k could allow earnings to grow tax–deferred (traditional) or tax-free (Roth), depending on how the plan is set up. Taxes are generally deferred until retirement withdrawals begin.

✅ No UDFI on Non-Recourse Loans

Solo 401k plans typically qualify for an exemption from Unrelated Debt-Financed Income (UDFI) under IRS rules (IRC 514(c)(9)). This means if the plan uses a non-recourse loan to buy property, the earnings usually aren’t subject to additional federal taxes.

✅ Higher Contribution Limits

In 2025, the combined contribution limit for a Solo 401k is up to $70,000 for those under age 50. If you’re age 50 or older, you may also make an additional $7,500 catch-up contribution, raising the total to $77,500. These higher limits could offer more flexibility for funding larger investments, depending on your eligible income.

✅ Checkbook Control

As the trustee of your Solo 401k, you generally have the authority to make investment decisions and sign contracts directly.  This setup could help you move faster, especially in competitive real estate markets.

✅ Asset Separation

The property is owned by the Solo 401k—not you personally—potentially offering protection from personal liabilities.

📝 Important Note: The IRS has strict rules against prohibited transactions. It’s important to avoid self-dealing or personal use of the property to maintain the tax-advantaged status of the plan.

How to Buy Real Estate with a Solo 401k

Buying property with a Solo 401k works a little differently than using personal funds. Here’s a closer look at how the process generally works:

1) Open and Fund a Solo 401k That Allows Real Estate

Start by choosing a Solo 401k provider that permits investments in alternative assets like real estate. Some providers limit you to mutual funds or traditional securities, so it’s important to double-check.

Next, you’ll need an Employer Identification Number (EIN) for your plan trust. The IRS requires it for proper plan administration. 

After that, fund the account. You could make new employee and employer contributions or roll over funds from an existing 401k or IRA, depending on eligibility and plan rules.

📌 Also Read: Transfer Vs Rollover: What’s The Difference?

2) Find a Property That Fits

Once the plan is funded, the next step is to find a property. 

Do your due diligence — analyze local market trends, check comparable sales, and estimate repair costs carefully. Remember that you must use the Solo 401k’s cash and non-recourse financing if needed. Personal guarantees on loans are not allowed when using a retirement plan.

3) Close the Purchase Properly

The property must be titled in the name of the plan, not in your personal name. A typical title might read [Plan Name] FBO [Your Name]. 

You’ll sign all documents as the trustee, not as an individual.

All costs tied to the purchase, including inspections, title insurance, and closing fees, should be paid from the Solo 401k’s bank account. No personal funds should be mixed into the transaction.

How to Manage the Property Within IRS Rules

Once your Solo 401k owns the property, it’s important to manage it according to IRS guidelines to maintain the tax advantages of the plan. 

🚫 You cannot:

✅ You must:

How to Sell and Reinvest Profits Tax-Free

When you sell a property inside your Solo 401k, the earnings stay within the plan. You can use the funds to buy another property or invest in other permitted assets. Since the earnings remain in the plan, they generally grow tax-deferred or tax-free, depending on your Solo 401k setup.

There are no taxes due at the time of sale as long as the money stays in the plan. This allows you to keep building retirement savings without triggering capital gains taxes along the way.

📝 Reminder: Keep detailed records of all transactions and expenses. If your Solo 401k’s total assets exceed $250,000 at the end of the plan year, you’re generally required to file Form 5500-EZ with the IRS. This form provides information about the plan’s financial condition and operations.

Wrapping It Up

Using a Solo 401k to flip real estate could give you a way to invest in properties with potential tax benefits. This strategy requires careful setup and management, but it may allow you to reinvest earnings and delay taxes until retirement.

However, it’s important to follow IRS rules closely, especially around prohibited transactions and plan administration. Keeping detailed records and working with third-party professionals for services like repairs can help maintain your plan’s tax-advantaged status.

Make sure to review the different Solo 401k providers and learn more about the plan requirements. Speak with a tax or financial professional to ensure the strategy fits your broader retirement goals.

📌 If you want to explore more about retirement and financial strategies, check out these articles:

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