Need guidance on using a self directed IRA for RE down payments

[Wayne Connell]

My wife and I have a retirement account we rolled over into a self directed IRA to use for down payments on two projects. One is a purchase of a small storage unit facility and the other is building a four plex. We would use about 15% of the purchase price from the IRA to purchase the storage units and the remainder of the purchase is going to be owner financed. On the build we will use about 30 to 35 percent of the build cost from the IRA and the remainder will be bank financed. Both will be non-recourse loans. While I am familiar with the pros and cons of using a self directed IRA and how they basically work, as well as some of the unique requirements when utilizing one, I am far from educated about the finer points.

The main issue I am having is I have the storage units under contract and I am trying to make a request for funds. However, the company I have the self directed IRA with says they cannot give me financial advice and I have checked with my attorney, financial advisor, and my CPA and none are very familiar with the self directed IRA. My CPA is willing to try to help getting it set up but is researching the procedures. Does anyone have any advice or guidance about how or what I need to do to ensure this is structured properly or can put me in touch with someone who can educate me. Thanks in advance!

[Dmitriy Fomichenko]

Originally posted by @Mike Kirby:

@Wayne Connell I think it would be a prohibited transaction to use 15% down payment from your SDIRA and then owner finance the rest. You can’t mix the two like that. Your SDIRA can get a non-recourse loan but most non-recourse loan providers will require more than 15% down payment. There are a couple of SDIRA companies promoting themselves on this forum. You need to talk to the one that seems like he knows what he’s talking about. It won’t take you much research to see who that guy is.

Mike, I think Wayne is referring to "seller financing", which is totally acceptable and would not be considered a prohibited transaction (Wayne please correct me if I'm wrong). You don't have to use bank or a mortgage company to finance investment deal in an IRA, any private lender, including a seller, can be the lender. And as long as the note is structured to be "non-recourse" - the IRA is in compliance.