Inherited IRA to Self Directed IRA with sweat equity?

[Dmitry Sorkin]

Hi,

This is my first post on Bigger Pockets. I have an Inherited IRA from my father I've been sitting on for about 3 years. I took a 5 year option because the investment company wouldn't let me do a stretch IRA back in August 2017. I'm a carpenter, and I want to start investing in house flips. I've worked on a few flips with my foreman (as a carpenter), and we were talking about becoming partners.

My question is, can I convert my inherited IRA into a self-directed IRA, and whether yes or no, is this the best option for me? I read that I can't put in any sweat equity which sounds crazy, but I can hire a crew to do the work while I just do my day job. Just looking for options, mainly with what to do with my Inherited IRA, other than just cash it out in a couple years.

Thanks in advance for your input.

[Carl Fischer]

@Dmitry Sorkin

Welcome to bigger pockets! 

Can you move an inherited IRA over to a self-directed IRA - Yes. Be aware of how much time you have remaining on your 5 years. Some non traditional investing that you can do in a SDIRA has longer life span, so always be aware of how much time is left.

Can your inherited IRA invest in flipping real estate - yes, but as @Linda Weygant mentions, you need to consider UBIT. Many investors still use their SDIRA to invest in flipping, but they talk about the possible UBIT with their advisor, CPA or tax specialist as each deal is different.

Can you do carpenter work on the property your inherited SDIRA owns - no. As you mentioned this is considered sweat equity. You can not do the work for free, and the SDIRA is not able to pay you as you are a disqualified or prohibited person.