Why Smart Investors Are Using Solo 401ks and Midterm Rentals in 2025

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In this episode of the Real Estate Pros Podcast, host Micah Johnson interviews Joshua D. Massari, who shares insights into his unique approach to real estate investing through Solo 401k accounts and midterm rentals. Joshua discusses the advantages of Solo 401k for self-directed investing, the ALL method for acquiring properties, and the growing trend of midterm rentals as a lucrative investment strategy. He emphasizes the importance of lead generation and the potential for scaling in the real estate market.

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Joshua D. Massari (00:00)
for me, I mean, we’ve turned $80,000 into a million dollars. So I think that’s worth it. And the way it’s ballooning now, I mean, the track record will, I mean, if we continue what we’ve been doing for the last nine years, we should hit 40 to 50 million on our retirement account at retirement age. So I think it’s worth it. know, and we started out by buying like small single family homes. We only had $80,000 to start with. So it was just buying, you know, what we could pay cash for. You can leverage in these. There are lenders that will do loans.

Micah Johnson (00:14)
Wow. Yeah, that’s definitely working.

Joshua D. Massari (00:28)
It’s a non recourse loan so you cannot guarantee the loan so your terms aren’t as good. The LTV is like 50, 60 % if you’re lucky so you’re not getting a great leverage on it but you can leverage inside the 401k.

Micah Johnson (02:15)
Hey everyone, welcome to the Real Estate Pros Podcast. I’m your host, Micah Johnson. And today I am joined by Josh, who is making some serious moves in the solo 401k investing space and also in the midterm rental space. I’m excited to dig in on this conversation. Josh, welcome in, man. Glad to have you.

Joshua D. Massari (02:32)
Appreciate you having me here. I’m excited.

Micah Johnson (02:33)
I am too. I think our listeners are really gonna take away how you wanna approach real estate in general, because it’s not even your full-time thing, yet you’ve built something pretty incredible with it, and just the different techniques that you’re leveraging to get the most out of it. So let’s dive in on that. For people who may not know you yet, what is your main focus right now and what markets you operating in?

Joshua D. Massari (02:55)
I wouldn’t say I have a main focus. have

a lot of focuses, which may be a problem of mine, but trying to narrow it in and kind of dial these in a little bit. But one of the big things that we do that’s very unique and a lot of people haven’t heard of is we have a Solo 401k, which is a self-directed plan. It’s very similar to a self-directed IRA. The Solo 401k is kind of the next step. If you own a business, you can sponsor a Solo 401k.

The difference between that and a self-directed IRS, you can put a lot more money into it, because you’re actually doing payroll. You’re not just contributing to it, you’re contributing to it as an employee, and you’re also doing out of payroll. So you can do up to 25 % of your W-2 for the year. They call it a single, I think the IRS classifies it as a single participant plan. So really it’s not designed for business owners that have employees. It’s designed for a business that’s just a single person running it or you and your spouse. And that’s kind of the extent of it.

Because if you’ve got employees, have to actually do, if I’m doing 25 % of my income, I have to do 25 % of everybody’s income that’s on payroll. So that’s why they call it a single participant plan because it’s really meant for one person. The other advantage is that I don’t have, I have checkbook control, whereas a self-directed IRA, you have to have a custodian that holds the money and you have to run everything through them and they have to cut the check or sign off on it. You have to run, you know, if you’re buying a property, everything’s got to go through the custodian.

where with a solo 401k you have full checkbook control. what they call it. So I make all the decisions on what I’m buying. I literally just wire money directly from the business account to the escrow for closing. So it makes it a lot easier, gives you a lot more control over the investments you’re doing. And so that’s the route that we took with this. But what I will say is, you’re not familiar with it, it’s a way to really ramp up your retirement account versus putting it in

to index funds and just waiting for the market to slowly, gradually over time, increase.

Micah Johnson (04:47)
Yeah, that’s a fascinating option for a solopreneur because not many exist out there for ones that go at it alone, but the ability to do this. What have you all been able to leverage that into and how long have you been doing it?

Joshua D. Massari (05:46)
So we started this

about nine years ago and I had worked for another company and I had a 401k. I come out of college, I started a 401k with this company and I think it was up to like maybe $80,000 at that point. And I rolled that over as the initial seed money to get this going. you know, now the account’s worth almost a million dollars now. Now some of that’s contributions, but the majority of it is gains from the real estate deals that we’ve done. When we first started, this was like nine years ago, I first started buying

Uh, in, think the first one I bought was actually in Kansas city. It was like an auction deal, held that for a couple of years, sold that for, I want to say five times what I paid for it. Uh, and then I started investing in South Carolina, um, randomly had a high school connection that was, uh, had moved out there, a realtor now investor knew the area. So I connected with her and started partnering with her on some deals outside the 401k as well as.

She was doing these 401k deals for me and I was buying properties for like 25 grand back then, which is pretty expensive. You don’t see that anymore, but I’d buy it for 25 grand. I’d put, you know, maybe 10, 15,000 into it for a rehab, rented it for five, six years. And I just did a Dispo cycle where we sold off most of those, but I sold them all for like a hundred, 125. So, you know, the, return on those properties were four or five times what I paid for them. Plus I was getting really good cashflow for that six, seven years that I was holding those.

Micah Johnson (07:11)
Now in doing that, if someone was interested in starting that, what do they need to pay attention to upfront in the setup phase and what are some areas they could get hung up?

Joshua D. Massari (07:20)
Yeah, so you got first, you got to talk to somebody make sure you can even do a solo 401k because you have to have the right entity structure to be able to sponsor it because you’re sponsoring it. you know, if you’re a W2 employee, your corporation that you work for is sponsoring that plan there. You still have to follow all the same IRS rules that any big corporation would on their 401k plan. So to be able to get a solo 401k set up, you’ve got to have either an LLC or an S corp or some sort of corporation that’s going to sponsor it to be compliant with the IRS. And there’s companies that will set these up for you.

It costs you probably a couple thousand dollars to get the plan set up and be all compliant with the IRS. But that’s pretty much it. Once you’re set up, you’re kind of on your own. And they’ll do like a maintenance each year just to make sure all the forms are up to date. And sometimes they’ll do a reinstatement every few years if there’s laws and things that change. But it’s pretty low maintenance and low cost once you have that set up. And it’s really just, you you’re managing it yourself.

Micah Johnson (08:10)
And what’s been the, what do you think that biggest benefit’s been for y’all from starting that?

Joshua D. Massari (08:15)
So I originally started it for the main reason was to be able to put more money away. So I’ve got no employees ⁓ in my company. I do have people helping, but they’re not on payroll. So they’re through temp agencies or independent contractors. So because I was the only employee and I also put my wife on at one point too, so I could start putting in more money. But we’re able, like I think for this year, I want to say it’s around 70,000 total between your employee contributions, which is like 22 now or something like that.

And then up to 25 % of your payroll that you pay yourself, which is another $50,000 that you can put in there. So you’re able to put in $70,000 and that’s tax. If you have it set up as a traditional 401k, you can do a Roth and a traditional, but if you have it set up as a traditional, that’s $70,000 of write-off and you can put your wife on it and your spouse. Now you got $140,000 in deduction that you can take just from putting money into your retirement account. So it’s a way to really supersize your 401k.

Micah Johnson (08:50)
Mmm.

Wow.

Joshua D. Massari (09:12)
Maximize your deductions on the front end if that’s what you’re looking for

Micah Johnson (09:15)
and then use that 401k to buy real estate and keep going. That’s what a powerful way.

Joshua D. Massari (09:17)
So I will say

this though, because this is not a misconception, but a lot of people say, well, you can’t depreciate it, which is absolutely true, because there’s no inside the 401k, it works just like a retirement account. So everything is tax deferred until I pull money out in retirement. So there’s no depreciation schedule. I’m not filing schedule ease because there’s no taxable income to even worry about. Right. So

Because it’s currently set up as a traditional, I would pay taxes when I pull it out, but you can also set these up as a Roth. You can also convert them at some point. So you’ve got some different flexibility there depending on what your financial situation is. But you do, I will say you do lose those write-offs on the front end because there’s no taxable income.

Micah Johnson (10:03)
Is there a trade off that y’all found is worth it?

Joshua D. Massari (10:40)
Yeah,

for me, I mean, we’ve turned $80,000 into a million dollars. So I think that’s worth it. And the way it’s ballooning now, I mean, the track record will, I mean, if we continue what we’ve been doing for the last nine years, we should hit 40 to 50 million on our retirement account at retirement age. So I think it’s worth it. know, and we started out by buying like small single family homes. We only had $80,000 to start with. So it was just buying, you know, what we could pay cash for. You can leverage in these. There are lenders that will do loans.

Micah Johnson (10:55)
Wow. Yeah, that’s definitely working.

Joshua D. Massari (11:10)
It’s a non recourse loan so you cannot guarantee the loan so your terms aren’t as good. The LTV is like 50, 60 % if you’re lucky so you’re not getting a great leverage on it but you can leverage inside the 401k.

⁓ So that is an option but we were just paying cash for these properties at first and just kind of most of it was cash. Now we’ve kind of sold all those off and we’ve started putting money into bigger deals. Now we’re going more multi-family. We just closed on.

year before last we just closed on our first apartment building with the 401k. So there’s a 14 unit apartment building, the 401k owns this apartment building. That one is leveraged. That one I was able to get good leverage on because I found a seller finance deal. So it was like 10, I think it was like 12 % down or something. And we were able to get into an apartment building and doing a bunch of rehab and just pushing up the ⁓ value of that based on what we’ll get at our exit.

Micah Johnson (12:04)
Yeah, value add man, value add multifamily, one of the best ways to go. So y’all are doing the sell 401k and then there’s another part that you’ve been working on in the midterm rental and in my, in some information you sent me, you used a term I hadn’t heard yet, but it’s borrowed off the burr idea. So dig into that a little bit for me.

Joshua D. Massari (12:22)
Yeah, so

we do, we kind of got into midterm rentals out here in California. It’s really hard to cash flow properties in California, especially where we’re at. I mean, you’re lucky to break even. Right now you can break even on most properties with long term rents. So what we started doing, ⁓ and the way we acquire properties here, because it’s very expensive, we’re in Orange County, and it’s the average in our city, I think the average home is like 1.6 million for just like a little three or four bedrooms starter home, basically. So

What we do is similar to the BRRRR method, we call this the ALL method. And what we’ll do is we’ll acquire property as a primary residence. So we’re buying it as a primary. We’re getting fixer uppers that we can still get financing on, but that haven’t been touched since they were built in the 60s. So it’s all original stuff. So we’ll acquire this property, and then we will actually move into it. We will move into it. So we’ll live into this property to satisfy the loan because most loans, Fannie Mae, you have to do one year of residency to satisfy the loan.

And then we will actually rehab it while we’re there. So we’ll lift the property value as much as we can while we’re there or before we move in, we’ll use you like a quick demo and kind of do like the kitchen, some of the main stuff. And then we’ll just keep working on it as we’re living there. And then we will leverage and get a key lock or some sort of second or third position to pull, unlock that equity. And then we’ll just loop the process.

So we’ll take that money that we pulled out, that’s gonna be our down payment and our initial renovation budget on the next one. And we do the same thing, we buy our next primary residence. And then when we move out, because we’re in California, we’re doing midterm rentals. So instead of just barely breaking even on our carrying costs, we’re doubling what we would as a longterm rent.

Micah Johnson (14:01)
Now let’s take on that midterm rentals. Who is the tenant that you’re looking for and how is it able to double that return?

Joshua D. Massari (14:09)
Yeah. So we didn’t really know when we first got into this. ⁓ we just thought, you know, travel nurses, let’s see here, midterm rentals, like is for travel nurses, right? So we had this little ADU in the backyard and we just, we started with that. I don’t, I think we’ve only had one travel nurse in the last two and a half years that we’ve been doing this. Like there are so many people looking for midterm rentals. We had no idea who the clientele was, but there is a huge need, especially for those smaller units. We have a house that’s 3,300 square feet. It has this ADU in the back, but the main house, actually

use communication doors like at a hotel, know, the two doors that have the deadbolts on each side. We put those and installed those, put soundproof insulation and actually made additional units out of this house because it was so big. We were able to turn a master into a small little studio and put a little kitchenette in there and use that as a rental property or as a separate unit. So we’ve got four units on this property now and we’re getting like probably I would say a little more than double what the long-term rents would be. But we get

everything. So displaced families is another big one from insurance claims. You know, somebody has a flood or fire, they got to go somewhere while their house is being redone. We get a lot of corporate placements, companies that are moving employees into the city. They just need a place to go with their family for until they kind of find what neighborhood they want to be in. These smaller units that we have, we get a lot of ⁓ students doing internships. So we still get medical, but they’re more clinical rotations.

⁓ We do get the travel nurses, but we have had found that these little units are booked out six months in advance solid like one run after another and The met the the travel nurses need more last-minute. They don’t get their contracts until like three weeks before they start

Micah Johnson (15:27)
Gotcha.

Joshua D. Massari (16:21)
So typically we don’t even have availability for for those type of people But there’s just a lot of different people that have these these needs for midterm rentals And we’ve actually started doing it to where to expand our portfolio and our offerings. We have so many leads coming in We don’t have enough properties. So now we’re co-hosting for other owners that have properties

And instead of doing like a rental arbitrage, you hear like people doing arbitrage, we just co-host. So we are co-hosting and running the property for them. They’re getting paid and we’re just getting a cut of that. So we’re taking our network of leads that we built up, placing those in other people’s properties and we’re getting paid on those.

Micah Johnson (16:52)
Man, that’s a smart way to keep making money out of those leads when you’re out of your own properties. Now, how did you build that machine to get leads?

Joshua D. Massari (16:59)
⁓ was just kind of by accident. Really. We just, had these really great listings and we got a couple of them going. We started getting a lot of leads. There are a lot of, call them placement providers. They’re corporate, ⁓ know, temporary housing, ⁓ providers that are kind of a go between, between companies and insurance companies and the owner operators. so they’ll, you know, insurance companies will contract with them to find housing for the families. And so they’re kind of like a middleman broker, if you will. And so we’ve just.

built up a big network with these individual companies and you know, all get all the properties in their databases and we’ve built relationships with them. So when they’ve got somebody that has a need, they call us, you got anything in your city? We got, you know, a family needs a three bedroom. What do you got?

Micah Johnson (17:38)
Man, those are the best phone calls to get. That’s, yeah. So what technically for someone that doesn’t know, what defines a midterm rental? What are the time ranges?

Joshua D. Massari (17:40)
Yeah, it makes it lot easier.

So midterm is

basically what it sounds like midterm. You got long-term, which is usually 12 months or more. You got an STR, which is short-term rental. When you think of 30 days or less, midterm is going to be anything that’s 30 days and over. And it’s going to be a furnished rental, just like a, like you would on Airbnb furnished rental, like a short-term vacation rental. So, you know, you’ve got it furnished, all utilities included. You know, we even do like shampoo and everything, all the towels, everything. When somebody comes, they just need their clothes and they can just move in. They got coffee. Everything’s just ready for them to go.

With midterm though, we don’t do like, you’re not restocking it ⁓ with a short term. So they get all the initial starter supplies and then, you know, after that, they go buy their own toilet paper. They don’t buy their own shampoo. They’re kind of on their own. Cause people will come for our average day, I think is about 10 weeks. So people are there for two to three months on average. So it’s a much longer stay. So you’re not going to have as much turnover. And we have, when we’re evaluating short term versus midterm for our clients, a lot of people don’t…

think about vacancy on a short term. They always like, oh, I can get $500 a night doing a short term rental or whatever it is. But they always like have in their mind, oh, $500 a night times 365, I could make a killing on this property. But you’re never going to have 365 nights on a short term rental. You’ll have your weekends maybe and your holidays and things like that. Maybe in the summer you got higher vacancy rate or occupancy, but there’s that Tuesday through Thursday that you’re hardly ever going to have booked and the slow times of the season, especially if you’re not.

here where we are where it’s not you know it’s not sunny all the time you got rain like you may not have as many people traveling so ⁓ you know a short-term rental like a by the beach like a really good one is going to be booked 22 nights out of the the month on average that’s a really really high occupancy rate for for a short-term rental with mid-term rental you’re booked for two three months straight and then you got a turnover so you’re going to have a gap between turnovers but we’ve gotten so efficient at it and and so good at at our calendar control on how we take our bookings

We just closed out 2025 with a three bedroom, bath, uh, between eight different guests. So we turned this over for eight different guests. We only had 10 days of vacancy through the entire year. So. Like, I mean, that’s, that’s an anomaly. I don’t know that we’ll be able to repeat that. We’re going to try to obviously, but we’ve, we’ve gotten it down kind to a science to where we’re able to just get these people in and out. And we’ve got so much demand that we’re able to just keep that going. So yeah.

Micah Johnson (19:51)
Holy cow.

right back

Joshua D. Massari (20:08)
So we, yeah, so vacancy doesn’t kill us, it does

on a short term.

Micah Johnson (20:11)
Yeah, that’s that’s insane. 355 nights out of the 365. That’s that’s awesome. Congratulations, man.

Joshua D. Massari (20:16)
You won’t see

any short-term rental doing those kind of numbers in vacancy. Obviously we’re not getting as much per but like the vacancy will just kill a short-term. That’s why so many people are getting out of short-term rentals. It’s such a saturated market now and so competitive. just not, they’re not booking it enough. They’re losing money on them.

Micah Johnson (20:20)
No, no, like you.

in a sense.

All right. you kind of have them in such the right spots. Like I’m based out of St. Augustine, Florida. There’s a Airbnb Mecca here, but there’s always something to do here. And it’s one of the places where you can do it. a lot that when that trend went through and so many people hopped in, it was, it was interesting to watch. Cause that was, like you said, what you’re not accounting for is the times where nobody’s there. And when 22 nights out of 30 on average is only booked, man, that adds up quick throughout the year.

Joshua D. Massari (21:01)
Yeah.

Yep.

Micah Johnson (21:03)
Now do you think there are you seeing a trend to this move towards more midterm rentals you think this is going to keep picking up.

Joshua D. Massari (21:10)
Yeah, there’s a big shift going on right now. ⁓ So out here in the West Coast, Jesse, Jesse Vasquez, have heard that name? So he’s real kind of like one of the big names in midterm rentals. He’s out of the Bay Area and he does a summit in San Diego each year and it’s getting bigger and bigger every year, but it’s definitely picking up a lot of steam. There’s a lot of people getting into it because short term is not working out. So they’re making the switch to midterm because there’s a man there and they’re able to

the numbers pencil out because you don’t have that vacancy. In California, I don’t know about where you’re at, but in California, a lot of cities have shut down short term rentals in the last year and a half or so. So there’s very few cities that even allow short term rentals at all. So because of that, you’re seeing people like, what do we do with this property? I bought with a 7 % interest rate and can’t cash flow as a long term rental. So now they’re moving in exploring the midterm rental and

And I’ll say that there’s a lot more demand, that demand is increasing. It’s a really fast growing industry right now because one, insurance companies are realizing, hey, we can put people in a midterm rental home versus having to put them in a hotel. And it’s way more cost effective for the insurance companies because if they’re doing a full rebuild on a kitchen or something that’s two, three, sometimes six months, with all the fires we had last year, we got people out of their homes for one to two years. So for them to put…

somebody in a hotel that’s comparable to what they had is way more expensive than putting them into a midterm rental. And it’s more it’s a lot more comfortable for the family’s being in an actual home instead of being in a hotel for a long extended period of time.

Micah Johnson (22:43)
that quote unquote displaced feeling. You get to go back to a little bit more normal, which is, and I could see that trend definitely growing because like you were saying, long-term rents are getting harder and harder to pencil everywhere. That’s not a local problem for California. I’m hearing it all around in every state, even over here in Florida. And we’ve got a pretty hot market most of the time. It goes through its things, but yeah, I was having a conversation the other day with someone talking about midterm rentals. So.

What are y’all excited about this year? What has you pumped? What’s the big opportunity?

Joshua D. Massari (23:15)
Yeah, so I mean, the midterm rentals, we’re really leaning into this and really kind of going all in on this. And to build our portfolio, we’re doing again, the all method that I mentioned earlier, which is similar to the BRRR, but with the all method, the difference is we are buying these homes as a primary and that’s how we’re getting into them. We’re getting ready to do another big project this year that we’re real excited about. We’re going to turn a 1600 square foot four bedroom. And if we get all the plans approved, we’ll end up with about a 3000 square foot

⁓ property with two ADUs and like a granny flat. So it’ll be four units that will be able to run out and we’ll do the midterm model. And then we’ll just, again, loop this, we’ll pull out equity on that and we’ll go buy another one to move into and just keep doing that. So, so for us, you know, this all method that we’re really leaning into, we’re able to buy properties as a primary and push appreciation. So we’re forcing appreciation to get into that equity. We’ve been doing this for the last five years.

We started with 270,000 in equity in the first property. Between three properties, we now have 2.3 million in equity. So we’re building equity really fast by doing this. And it’s something we got to pay to live somewhere anyway, right? So we’re using that as a lever to build our wealth really fast. So that’s kind of what we’ve really been picking up on. And I’ll say anybody that’s interested in how we do this, we do have ⁓ a free blueprint that we download that you guys can have access to.

just seeing how we did this and what the game plan was to be able to access that. And a lot of people don’t realize that you don’t have to sell your home to buy the next one. You everyone sells their home, they take the down payment and roll it over there and you’ll see people put 30 or 40 % down. like, why are you doing that? just tap into that equity, roll that over into another one. Now you’ve got a property that’s got equity here. You move some of that equity, you’re not losing it. You’re just moving that equity to another property. Now you got two properties.

Micah Johnson (24:55)
Right.

Joshua D. Massari (25:05)
So if there’s an another appreciation cycle where you get a bunch of appreciation, instead of getting on one property, you’re getting it on two properties and you’re leveraged. you’re just exponentially growing your equity and building your wealth that much faster.

Micah Johnson (25:17)
And how y’all are doing it by taking a 1300 square foot property and turning it into four units and then making those midterm rental. is, that’s wow. Right. That’s I’m almost speechless because that it’s, it’s you’re thinking so far outside the box and I absolutely love it. Now, if, if someone wanted to be able to reach out and connect with you and learn more about what’s going on beyond that blueprint, we’ll make sure that we have that link in the description. What’s a great way to find you.

Joshua D. Massari (25:28)
Yeah.

Best way to find us is on Instagram. ⁓ We have a podcast ⁓ you can listen to our podcast. It’s the broke millionaires We’re on Spotify Apple YouTube pretty much anywhere you listen your podcasts and our Instagram just hit us up in the DMS It’s the broke millionaires with an underscore. That’s probably the easiest way to get a hold of me

Micah Johnson (26:01)
Man, that’s great. I appreciate that. And again, we’ll make sure that their information is in the description below the episode. Josh, I really appreciate your time, man. You’re storing your perspective today. It’s fascinating. I love getting to meet people and hear about how they’re taking real estate and changing their lives and even other people’s lives. The fact that you’re able to help folks, particularly the story about the fires, man, that one hits hard. Folks are going through a hard time. You’re able to support them in a way that supports them. Your family grows the whole

the whole bucket for you. So thanks for sharing that. If you got value out of today’s episode, please like the episode, subscribe to the podcast. We’ve got more operators coming up, just like Josh, who are out there making a difference in real estate, building real businesses and creating that generational wealth. So thanks for joining us today. We’ll see you on the next episode.

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Why Smart Investors Are Using Solo 401ks and Midterm Rentals in 2025

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