IRA for rental property

[Wayne M.]

I am thinking about an SD IRA for the purchase of a rental property and my question is, I know that all of the rent payment goes back into the IRA but once it is paid off does the payment continue to go into the IRA or can it be transferred into another account?
I am still not sure of all the in's and out's, pro's and con's of the SD IRA. So any help will be greatly appreciated.
Wayne :roll:

[Jon Holdman]

Originally posted by Mitch Kronowit:

Originally posted by Will Barnard:

holding property inside a SDIRA is not, in my humble opinion, the best use of SDIRA funds as there are many negatives to it.

Such as?

1) Its hard to get leverage inside an IRA. You're looking at 60-65% LTV's at best and above market rates.
2) You'll pay UDFI tax on the debt financed portion.
3) The debt financed fraction is current debt divided by the basis. Depreciation reduces the basis faster than the loan payments reduce the debut, unless you have a very short loan. So, the fraction of your income subject to UDFI actually goes up over time.
4) If you pay cash, you have to really have to have a screaming deal to make a good percentage return.

Generally, you can do better with some sort of lending. Buying notes, originating notes, etc. That's purely passive and not too difficult to manage about 12%. And notes are (usually) a lot less work than rentals.