Lets say for example I wanted to buy a house for $50K. If I use my self directed IRA, do I have to wait until 59.5 before I can touch the rental income? Also, can I use Solo 401K funds for repairs and expenses?
ANSWERS:
Yes a self-directed IRA LLC may invest in real estate. Title to the property would be taken in the name of the IRA fund LLC not the self-directed IRA. The income generated from the IRA LLC owned investment would flow back to the LLC and subsequently to the self-directed IRA from the LLC bank account. You could then take distributions from the IRA including the investment gains without meeting a triggering event (e.g., age 59 1/2, retirement, etc.) because distributions from IRAs are not as restrictive as those processed from 401k plans including solo 401k plans; however, the IRA distribution would be subject to the 10% early distribution penalty if you are under age 59 1/2 at time of the distribution.
Lastly, while you would not be able to use solo 401k funds directly to pay for expenses associated with real estate owned under a self-directed IRA LLC because the IRA LLC not the solo 401k owns the property, you may be able to transfer solo 401k funds to the self-directed IRA and then invest them in the IRA LLC. Once in the IRA LLC, the funds can then be used to cover expenses associated with the IRA LCC owned property.