investing in rental property

[randagulp]

Participant wants to purchase rental property as an investment in his self-directed 401(k) account.

Just throwing this out there, but does anyone suggest any good sources that cover the issues related to this sort of transaction? Any books, articles, IRS guidance, etc., that talk about the aspects of this transaction as the property is brought in the trust, issues while it is held in the Plan trust, issues that arise when the property is disposed by the trust, how the property is valued for ERISA and 5500 purposes, how the property can/cannot be used by the participant, etc.?

Thanks in advance.

[david rigby]

A simple beginning is to use the Search feature on these Boards. Use the word rental.

[ESOP Guy]

Or search real estate in this board.

Also you can simply move to it being a bad idea.

[My 2 cents]

Caveat - I do not have any direct involvement with real estate investments.

Who would be paying for the periodic independent appraisals that must be obtained?

Any contingency plans for disposition of the asset when a distribution is wanted/mandatory? One of the problems with real estate is that it can be so illiquid, especially specific properties.

I have no direct knowledge of restrictions that may apply with respect to such property (i.e., limitations on self-dealing in the selection of the investment and use of property by 401(k) participant when the 401(k) account has an ownership interest, etc.), but anyone seeking to make such an acquisition had better be doing so based on sound legal guidance.

In what way would investing in a specific property be better than buying shares of a real estate trust, where the selection of the properties to be invested in is beyond the reach of the participant?