QUESTION: I have an
opportunity to loan $100, 000 to a fix and flip investor over 6 months at 14%.
If I understand correctly I can use only $2500 from my Fidelity Solo 401k
($5000 balance) by writing a check? Then I plan to use $50,000 from my Fidelity
Traditional 401k and $47,500 from my regular savings account for the balance.
Is this in order?
ANSWER: If you are making the loan
investment through the solo 401k, the full amount in the solo 401k can be used.
Why is this? Because it would be considered an investment by the solo 401k. Therefore,
the solo 401k would be listed as the lender. Further, all the promissory note
payments would be deposited back into the solo 401k bank or brokerage account. Please
click here to read our sample promissory note investment procedure. With regards to the rest of your questions, the
other 401k plans would first need to be transferred to the solo 401k if you
need the full balance to make the promissory note investment.
Thank you,
Brenda in New Jersey
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