I would like to have the solo 401K LLC lease (20 year) 2 parcels from the airport authority and build a hangar for the purpose of leasing. The building would be a duplex type hangar with 2 separate units and a condo type set up for each hangar. I can get a non-recourse loan to construct. The LLC would lease the property and also be on the deed for the “improvements/hangars”. At some time in the future someone may want to purchase a hangar.
Please let me know if this is possible? recommended or not?
What any pitfalls may be?
I understand all of the transaction must go thru the LLC entity and I am merely a manager. No mixing of personal funds and I can’t work on the project for any gain of any sort. I will lonely be handling the transactions for the LLC as a manager?
Lease rate on each parcel is about $1200 per year. Taxes on each parcel are about $800 per year. Cost to build both hangars in one building is about $1.25MM.
Thanks you for providing some clarity.
ANSWERS:
Yes the 401k rules allow for investing in land leases as long as the land is not leased from a disqualified party (e.g., you or certain relatives). The solo 401k owned LLC (single member) will need to be listed as the lessee on the lease with the payments made by the LLC.
Yes the loan will need to be non-recourse since the solo 401k owned LLC will be constructing the hangar.
When the hangar is sold, it cannot be sold to a disqualified party. While the hangars are being rented out, all the payments will need to flow back to the solo 401k owned LLC and ultimately to the solo 401k once retirement account distributions commence.