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If you’ve ever looked at your retirement account and thought, I wish I could put this money into real estate instead of the stock market, you’re not alone.
The good news? You can—if you know the right tools to use.
Most people don’t realize that Self-Directed IRAs (SDIRAs) and Solo 401(k)s let you invest in real estate, private lending, and other alternative assets while keeping all the tax advantages of a retirement account. That means you can build passive income, appreciation, and long-term wealth—without the rollercoaster of the stock market.
But like anything in investing, it’s all about knowing the rules and choosing the right strategy. Let’s break it down in a way that actually makes sense.
What’s the Difference Between an SDIRA and a Solo 401(k)?
Both accounts let you invest in real estate—but they work a little differently.
Self-Directed IRA (SDIRA): The Flexible Option
An SDIRA is a retirement account that gives you control over your investments. Unlike traditional IRAs that limit you to stocks and mutual funds, an SDIRA lets you invest in:
✔ Real estate (syndications, rental properties, land).
✔ Private lending (mortgage notes, hard money loans).
✔ Private equity (real estate funds, startups).
It’s a great option if you’re not self-employed and want to put your retirement funds into real estate deals instead of the stock market.
Solo 401(k): The Power Move for Business Owners
A Solo 401(k) is like an SDIRA—but with more perks. It’s designed for self-employed investors or small business owners with no full-time employees.
Here’s why it’s a game-changer:
✔ Higher contribution limits – You can put in up to $66,000 per year (or $73,500 if you're over 50). That’s 10x more than an IRA.
✔ You can take a loan from it – Need cash? Borrow up to $50,000 from your Solo 401(k). SDIRAs don’t allow that.
✔ No UBIT tax on leveraged real estate deals – If you buy real estate with financing inside an SDIRA, you owe Unrelated Business Income Tax (UBIT) on profits. With a Solo 401(k)? No UBIT.
If you’re self-employed, a Solo 401(k) usually beats an SDIRA hands down. More money, more flexibility, fewer tax headaches.
Why Use an SDIRA or Solo 401(k) for Real Estate?
1. Tax-Free or Tax-Deferred Growth
This is the big one. Your real estate investments grow tax-free (Roth) or tax-deferred (Traditional) inside these accounts.
Traditional SDIRA or Solo 401(k) – You don’t pay taxes until you withdraw in retirement.
Roth SDIRA or Roth Solo 401(k) – You pay taxes upfront, but all future gains are tax-free.
Let’s say you invest in a real estate syndication that doubles your money over five years. If it’s inside your SDIRA or Solo 401(k)?
💰 You keep every dollar—no capital gains tax.
2. Real Estate is More Stable Than the Stock Market
Stocks are volatile. Real estate is real, tangible, and produces cash flow.
With an SDIRA or Solo 401(k), you can invest in:
✔ Factory-built home communities (like what we develop at Upslope Group).
✔ Multifamily syndications (pooling capital to buy apartments).
✔ Private real estate loans (earning interest on secured loans).
You’re not tied to Wall Street—you’re investing in real assets that hold value.
3. Passive Income That Grows Tax-Free
Real estate produces cash flow, and when it’s inside an SDIRA or Solo 401(k), you don’t pay taxes on that income.
✔ Rental properties = Monthly income without tax drag.
✔ Real estate debt investments = Interest payments straight to your retirement account.
✔ Syndications = Quarterly cash flow without capital gains taxes.
Instead of watching your retirement balance swing up and down, you’re building steady, tax-advantaged income.
The Challenges (And How to Handle Them)
1. IRS Rules Can Be Tricky
🚫 No personal use – You can’t live in or rent out a property owned by your SDIRA or Solo 401(k).
🚫 No self-dealing – You can’t buy a property from yourself or manage it directly.
🚫 Transactions must go through your custodian (for SDIRAs).
Solution? Know the rules and work with an experienced custodian.
2. Financing Can Be Tough (But Not Impossible)
If you want to use leverage:
SDIRAs require non-recourse loans (higher down payments, stricter terms).
Solo 401(k)s avoid UBIT tax on leveraged deals, making them the better choice for buying real estate with financing.
Solution? Plan to invest with cash—or use a Solo 401(k) to avoid extra taxes.
3. Liquidity Can Be a Challenge
Real estate isn’t as liquid as stocks. If you invest through an SDIRA or Solo 401(k), your money is locked in until retirement (59½).
SDIRAs don’t let you take loans if you need cash.
Solo 401(k)s let you borrow up to $50,000—a big advantage.
Solution? Only invest money you don’t need right away—and consider a Solo 401(k) for extra flexibility.
Final Thoughts: A Smarter Way to Build Wealth
Using an SDIRA or Solo 401(k) for real estate is one of the best-kept secrets in investing. It lets you:
✅ Invest in private real estate deals instead of the stock market.
✅ Grow wealth tax-free or tax-deferred.
✅ Earn passive income while protecting against market volatility.
The key? Knowing the rules, structuring investments the right way, and choosing the account that fits your situation.
If you’re serious about using retirement funds to invest in real estate, let's talk.
📞 Schedule a Call Today and let’s figure out the best strategy for you.
Disclaimer
This article is for informational purposes only and does not constitute investment, tax, or legal advice. Always consult with professional advisors before making investment decisions.