Investing in Real Estate with a Self-Directed Solo 401(k): A Comprehensive Guide
By Michelle Clardie on 11/09/2025.
Reviewed by Josefin Gatsby
American retirement accounts are becoming more flexible to meet the changing needs of today’s workers.
Self-Directed Solo 401(k)s, for example, allow the growing population of self-employed workers to benefit from tax-advantaged retirement savings and use those savings to invest in alternative opportunities, including real estate.
What a Self-Directed Solo 401(k) is and how it works,
The benefits of using Self-Directed Solo 401(k)s for real estate investments, and
How to invest in real estate with a Self-Directed Solo 401(k).
We’ll also provide answers to some of the most frequently asked questions on this subject.
Consider this your guide to investing in real estate with a Self-Directed Solo 401(k).
What Is a Self-Directed Solo 401(k)?
A Self-Directed Solo 401(k) is a retirement plan designed for self-employed individuals or small business owners with no full-time employees (other than a spouse) who want full control over their investment choices. Ideal for freelancers, sole proprietors, and even gig-workers, Self-Directed Solo 401(k)s allow you to invest in alternative assets that standard Solo 401(k)s don’t allow.
While traditional retirement accounts are limited to the stocks, bonds, and funds offered by the financial institution managing your account, the “Self-Directed” part of a Self-Directed Solo 401(k) allows you to invest in:
Real estate,
Precious metals,
Private companies, and
Cryptocurrency.
How Do Self-Directed Solo 401(k)s Work?
401(k)s are known as employer-sponsored retirement plans. With a Solo 401(k), you act as both the employer and the employee, with the ability to contribute as both parties.
As the employee:
You may contribute as much as you like up to the limits, which change annually. For 2025, the limit is $23,000 for those under 50 and $30,500 for those 50 and older.
Your retirement contributions are either traditional or Roth:
If you choose a traditional Solo 401(k), your contributions are pre-tax, meaning that the amount contributed is tax-deductible in the year of contribution. For example, if you contribute $20,000 this year, that’s $20,000 less income that gets taxed when you file your tax return. Your contributions then grow deferred until you make withdrawals from the account in retirement, at which point withdrawals are taxed as earned income.
If you choose a Roth Solo 401(k), your contributions are after-tax. This means there is no upfront tax benefit, butyour contributions grow tax-free, and withdrawals are not taxed during retirement.
As the employer:
You can offer yourself a contribution match, contributing another dollar for each dollar you contributed as an employee, up to the annual limit. For 2025, the limit is 25% of your compensation (or 20% of net self-employment income if you’re a sole proprietor or single-member LLC, since you must account for the self-employment tax).
Employer contributions to your Solo 401(k) are always pre-tax, reducing your business’s taxable income.
The combined contribution limit from both the employee and employer sides is $69,000 for 2025 ($76,500 for those 50 and older).
How to Set Up a Self-Directed Solo 401(k)
While standard Solo 401(k)s can be established through mainstream brokerage firms (like Fidelity, Charles Schwab, and Vanguard), if you want to self-direct your Solo 401(k), you’ll need to work with a specialized plan provider that specifically allows alternative investments (such as Ubiquity, Ascensus, or Solo401k.com).
Your provider will establish a legal trust and can name you as the trustee to authorize your self-directed investments.
As the retirement account holder/trustee, you are responsible for completing due diligence, selecting investments, and ensuring that your chosen investments do not fall under the IRS’s prohibited transactions.
Transactions Prohibited by Self-Directed Solo 401(k)s
The IRS prohibits certain transactions from self-directed retirement accounts, primarily to reduce unfair advantages in the marketplace. Key prohibitions, particularly for those using retirement funds to invest in real estate, include:
Buying or selling property between the trust and a disqualified person. Certain people are disqualified from any involvement with properties in the Solo 401(k) trust. Disqualified persons include: You, as the trustee, your spouse, your parents, grandparents, children, grandchildren, spouses of your children or grandchildren, your financial advisor, and any entities owned or controlled by any disqualified person. So, for example, you cannot buy a property from any disqualified person with your retirement trust.
Using trust assets for personal benefit. You and your disqualified persons cannot, for example, live or vacation in a property owned by your Solo 401(k).
Servicing trust assets yourself. For example, you cannot handle repairs or landscaping on a rental propertyowned by your retirement trust yourself. You would need to hire a professional, using funds in the trust to cover the expense.
Co-mingling funds. All expenses for assets held in the trust (taxes, insurance, repairs, etc.) must be paid from the trust, and all income from those assets must remain in the trust.
Receiving unreasonable compensation for managing the trust’s investments. You cannot pay yourself a management fee from the Solo 401(k) for directing your investments.
Real estate in a Solo 401(k) trust can’t be financed with a traditional mortgage. If you plan to use debt leverage to acquire properties for your trust, you need to find an alternative financing method that does not use the property as collateral.
Self-Directed Solo 401(k)s vs Self-Directed IRAs
Like Self-Directed Solo 401(k)s, Self-Directed IRAs (SDIRAs) let you invest in alternative assets like real estate for retirement, but these two retirement account options vary in a few ways:
Eligibility. Solo 401(k)s are specifically for self-employed workers without full-time employees (other than a spouse). SDIRAs, on the other hand, are available to anyone.
Contribution limits. Solo 401(k)s allow much higher contributions than IRAs (which are limited to $7,000 in 2025, $8,000 for those 50 and older).
Administration. Self-Directed Solo 401(k)s are typically administered by the account holder, as the trustee for the account, while SDIRAs are typically administered by a custodian.
Loans. While loans aren’t allowed from IRAs, you can borrow up to 50% of your Self-Directed Solo 401(k) (to a maximum of $50,000). There are, however, many rules regarding interest rates and repayment periods.
Debt leverage taxation. When using non-recourse loans to finance your investments, IRAs treat gains from the leveraged percentage as taxable under Unrelated Debt-Financed Income (UDFI) rules. Solo 401(k)s are exempt from UDFI tax.
The Benefits of Using Self-Directed Solo 401(k)s for Real Estate Investments
Real estate has always been one of the most popular assets held in Self-Directed Solo 401(k)s. Here’s why:
Tax-advantaged returns. Rental income and profits from property sales grow tax-deferred in a traditional account or tax-free in a Roth, allowing your earnings to compound more efficiently.
Diversification. Because real estate values aren’t directly linked to stock performance, adding property to your retirement plan can help diversify your portfolio and provide some insulation against market swings.
Truly passive income. Self-directed retirement account rules limit hands-on involvement, so your investment returns stay passive.
Ways to Invest in Real Estate with a Self-Directed Solo 401(k)
In addition to the other benefits of investing in real estate through a Self-Directed Solo 401(k), you get the flexibility of investing in any number of varied real estate opportunities, including:
Distressed property fix and flip projects (as long as you do not complete the work yourself)
How to Invest in Real Estate Syndication/Crowdfunding with a Self-Directed Solo 401(k)
Real estate syndication/crowdfunding is quickly becoming a popular choice for Self-Directed Solo 401(k) account holders because of its high return potential and ease of investing (among other benefits).
Syndication/crowdfunding allows you to pool funds with other investors to finance a specific real estate project (which could be nearly anything, from house flips to multi-family developments). Projects are carefully curated and professionally managed by a real estate sponsor. All you have to do is choose your project(s), submit the funds, and track your investment!
Gatsby Investment, for example, has provided average annualized returns of 22.3% to its investors since being founded nearly a decade ago. Gatsby proudly accepts Self-Directed Solo 401(k)s as a way to invest, making it easier than ever for self-employed workers to grow their tax-advantaged retirement portfolio quickly.
How to Invest through a Self-Directed Solo 401(k) with Gatsby
To invest in real estate syndication with Gatsby through your Self-Directed Solo 401(k), follow these simple steps:
Open a free account. Create an account using your full legal name, and select “retirement account” as your investment type when prompted.
Verify your accredited investor status. Upload documentation directly through the Gatsby platform to confirm that you meet the income or net worth requirements for accredited investors.
Browse available projects. Choose from Gatsby’s expertly analysed real estate deals. With investment minimums as low as $25,000 for multi-family opportunities, many investors spread their capital across multiple projects for instant diversification.
Place your investment. As the trustee for your retirement account, you can wire the funds to Gatsby to activate your investment.
Monitor your project(s) performance. Keep tabs on your syndication holdings through Gatsby’s convenient online dashboard. Your account will automatically receive a Schedule K-1 each year reflecting income earned to simplify your tax reporting. You can also reinvest your proceeds into new projects to continue building long-term, tax-advantaged growth!
FAQs About Investing in Real Estate with a Self-Directed Solo 401(k)
Can I invest in real estate syndication with a Solo 401k?
As long as your Solo 401(k) is self-directed, yes, you can invest in alternative investments, including real estate syndication.
Do I need to be an accredited investor to open a Self-Directed Solo 401(k)?
No, you do not need to be accredited to open a Self-Directed Solo 401(k). However, you may need to be accredited to invest in certain opportunities (including most real estate syndication projects).
Are Self-Directed Solo 401(k)s subject to UBIT or UDFI taxes when investing in real estate?
In most cases, no. Unlike Self-Directed IRAs, Solo 401(k)s are exempt from Unrelated Debt-Financed Income (UDFI) taxes when using non-recourse loans for real estate. However, Unrelated Business Income Tax (UBIT) could apply if the plan invests in an active business (like flipping houses as a trade).
How are Required Minimum Distributions (RMDs) handled if my Solo 401(k) owns property?
When you reach the age for RMDs, the IRS requires withdrawals based on account value. If your plan holds illiquid assets like real estate, you can satisfy RMDs by distributing rental income, selling part of the property, or, in some cases, distributing fractional ownership shares. With syndication, there are planned exit points for each project, making it easier to prepare for RMDs.
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