What Can You Invest In A Solo 401(k): A Complete Guide

A Solo 401(k) is self-directed and allows for many opportunities for investing, both in traditional and alternative assets. However, some providers limit the options available in their specific plans. Some of these plans may not include specific investments, but there are investments of varying degree of riskiness that should be available with all providers.

Author

Josh Cruz

Jul 20, 2023

A Solo 401(k) is self-directed and allows for many opportunities for investing, both in traditional and alternative assets. However, some providers limit the options available in their specific plans. Some of these plans may not include specific investments, but there are investments of varying degree of riskiness that should be available with all providers.

Here are some of the things that can be invested in with a Solo 401(k) plan:

  • Mutual Funds

  • Stocks

  • Bonds

  • Real Estate

  • Tax Liens

  • Private Placements

  • Precious Metals

  • Energy Investments

  • Equipment Leasing

  • Foreign Currency

  • Cryptocurrency

Do note that some investments are subject to an unrelated business income tax. Be sure to check before selecting an investment and keep reading for a more thorough breakdown of investment opportunities that can be done with a Solo 401(k) retirement plan.

Traditional Assets You Can Invest in with Your Solo 401(k) Plan

Traditionally, investments come in the form of things like stocks and bonds. These are typically pretty safe options to invest in, and most providers will make it easy to do so. 

These traditional assets include:

  • Stocks

  • Bonds

  • Annuities

  • Money market

  • CDs

  • EFTs

Of course, the market can be volatile, so it’s usually recommended not to stick everything into any one type of investment. That even means these traditional ones. 

Real Estate Investments You Can Make with Your Solo 401(k) Plan

While not quite as traditional an investment as things like stocks and bonds, real estate has become an extremely popular investment opportunity. Thankfully, it’s also common and easy to get investing in real estate with a Solo 401(k) plan. Both residential and commercial real estate opportunities are on the table, and there’s quite a few options for each.

Residential

Residential real estate is the kind where someone lives rather than conducts business. Think places like single apartment, condo, or townhouse units, single-family homes, RVs, and mobile homes. However, that’s not necessarily all that’s available to invest in with a Solo 401(k).

Rentals

A residential property doesn’t have to be just what the owner of the 401(k) is going to be living in. They can also invest in rental properties and have it go towards that as well.

Here are some rental properties that can be invested in:

  • Apartment

  • Condo

  • Townhouse

  • Single-family homes

  • Mobile Homes

  • Vacation

Do note that these do not count for entire complexes, but instead individual units. For entire buildings and/or complexes, please keep reading down to the Commercial section.

Flips

Flipping in real estate means buying something low with the intention of flipping it for a higher price in order to turn a profit. Usually it’s purchasing a fixer upper, making it nice, and using that to boost the value.

Here are some flipping opportunities that can be invested in:

  • Single-family homes

  • Mobile homes

  • RVs

Keep an eye on local laws and regulations regarding flipping. Some areas have protections in place against flipping, while others have limited or no requirements regarding them.

Properties

The opportunities for investing in real estate with your Solo 401(k) doesn’t stop at a building. It also includes properties. In some cases, these can slip into other categories as well.

Here are some properties that can be invested in:

  • Foreclosures

  • Bank-owned and REO

  • Public probate

  • Sandwich lease

  • Developed and undeveloped land

  • Those subject to an existing mortgage

This is another set of things that might need some peeking at local laws and regulations about, so be sure to bring it up with your provider if you’re unsure.

Additional Residential Investment Opportunities

If all the aforementioned wasn’t enough, there are still some additional investment opportunities for residential real estate.

Such investments include:

  • RVs

  • Duplexes

  • Tax liens

  • Tax deeds

  • HUD homes

  • Wholesale purchases

  • Residential REIT’s

  • Turn-key real estate

Basically, just about any kind of residential real estate investment opportunity can be invested in with a Solo 401(k). Just be sure to check with a qualified provider such as those at SEPira(k) before diving in so that you can make the best decision for your area and means.

Commercial

Interested in investing in commercial real estate with your Solo 401(k) plan? Perhaps you already have some as part of the business attached to it, or maybe you have one on the side. Thankfully, commercial real estate can also be invested in with one of these retirement plans.

Complexes and Facilities

While individual units where people live count under residential, the whole building complex counts under commercial. Additionally, complexes and facilities for commercial use are also places that can be invested in with a Solo 401(k).

Such complexes and facilities include:

  • Apartments

  • Condos

  • Townhouses

  • Mobile home/RV parks

  • Retirement homes/assisted living facilities

  • Storage

  • Recreational

  • Offices (including medical)

Some of these might have residents in them, such as apartment complexes or entire townhome buildings, but other things like storage facilities or office buildings might be for proper commercial use. Either way, these sorts of complexes and facilities can be invested in.

Additional Commercial Investment Opportunities

There are a lot of additional sorts of commercial real estate investment opportunities than just general places where people live or work. There are some more specific opportunities as well.

Such opportunities include:

  • Farmland

  • Hotels and resorts

  • Private parking lots

  • Parking garages (public and private)

  • Turn-key real estate

  • Commercial REIT’s

  • Warehouses

  • Shipping/Distribution centers and yards

  • Airplane hangars 

Basically, is it some form of real estate meant to turn some sort of profit? Then it probably counts towards commercial real estate that might be viable for investing in with a Solo 401(k) plan.

Alternative Assets You can Invest in with Your Solo 401(k) Plan

Solo 401(k) plans are there for self-employed individuals, so they’re popular for freelancers and independent contractors. If there’s nobody you’re giving out W-2s to and you’re self-employed, you probably qualify for one of these plans. Depending on your individual needs, investing in more traditional options or real estate might not be something you can or want to do. Or perhaps you’re looking to widen your investment portfolio. No matter the reason, there’s also plenty more asset options you can invest in with your Solo 401(k) plan.

Loans and Financing

A common opportunity for investors of all kinds is getting into loans and financing opportunities. These are typically safe bets, as long as the other side is reliable.

Here are some of the loans and financing opportunities that can be invested in:

  • Micro loans

  • Construction loans

  • Personal loans (both business and individual)

  • Equity participation loans

  • Auto finance loans

  • Mortgages (both commercial and residential)

  • Equipment financing and rentals

  • Vacation entertainment rentals

  • Furniture rentals

  • Private stocks

  • Performing notes

  • Non-performing notes

These sorts of things can be a bit tricky, so be sure to discuss with an expert to be sure you’re selecting asset opportunities that will be the most worthwhile to you and your needs.

Business

It’s pretty common to be told nowadays that to make money you should start up a business. Which, if you qualify for a Solo 401(k), you probably already know. So, it’s a good thing you can take that knowledge use it to bolster your Solo 401(k) investment portfolio.

Here are some business assets to consider investing in:

  • Hedge funds

  • Venture capital

  • Limited Partnerships

  • C Corporations

  • Limited Liability Companies

  • Joint ventures

  • Food trucks

  • Advertising (billboards, online, etc)

  • Corporate debt

  • Delivery vehicles

These can be pretty safe options, but also come with some risk. They are rather common assets though, so most providers have some way to invest in them.

Additional Alternative Assets

Some alternative assets are more common investments nowadays than others, and new things are popping up all the time. Expert providers can help you find the best options for you, your needs, and your investment portfolio.

Here are some additional alternative assets that have not yet been discussed:

  • IPOs

  • Blockchain

  • Private placements

  • Precious metals

  • Cryptocurrencies

  • Oil, gas, and royalty interests

  • Life insurance

  • Movie and theatre productions

  • Account claims and accounts receivable

  • Mining rights (both oil and mineral)

  • Foreign currency

Some of these assets can be extremely volatile as far as the market goes. That makes them pretty risky, such as foreign currency, cryptocurrency, and anything regarding the blockchain. However, other things, such as precious metals and energy are often seen as safer options to invest in. 

Conclusion

If you’re a self-employed individual without w-2 employees residing in the US, you probably qualify for a Solo 401(k) plan. This opens up higher contribution limits and investment opportunities, but the recordkeeping can be a hassle. There’s also a lot of risk involved in the process. Thankfully, there are providers such as SEPira(k) who not only have experts in the field, but also have a state-of-the-art and secure platform to make managing and investing with a Solo 401(k) a breeze.

One wrong move and the IRS is going to be happy to disqualify the whole plan, even if only a few things are meant to be considered taxable income. So while it’s great that a Solo 401(k) is self-driven, it’s also nice to have someone to help ensure that things are going to work for you not against you when selecting assets to invest in.