Mandatory withdrawals out of a 401k start on the year you turn 71.5. I am not sure how that plays out if all your cash was tied up in a piece of real estate. I would guess that you are not immune to this law and you better have some liquid reserves to withdrawal.

In a self directed 401k, I understand that you must be able to purchase the property without additional financing.

With the current housing and looming commercial property problems, I think this would be a horrible investment at the moment.

I don’t see how starting a self directed 401k would affect your tax basis. Am I missing something?