How to utilize my old IRA.

[Risa Hind]

So my husband and I have a combined $25,000 ($11,000 in mine, and about $14,000 in his) in old 401k's that I am looking to possibly use as down payments for rental properties in either a self-directed IRA or something where I have more control. Here are my questions:

1) Is it possible to combine my IRA with his, or do we need to keep them separate?

2) Is it possible to use these small amounts as a down payment on rental properties and get loans or other funding for the rest? If so, how does that work with the cash flow? Does all the cash flow go straight to the IRA, or would I be able to take some cash flow?

3) What vehicle would be my best option for this scenario?

[Ken Badziak]

Mike Reynolds I'm not a CPA, so I can't offer actual advice. But what I can tell you is that after researching this issue with my $50k SDIRA, I found that owning actual RE with it wasn't worth the hassle. There are many many more hoops to jump through, and paperwork needing to be filed, and custodian fees (and fees and fees) not to mention having to deal with "non-recourse loan" lenders AND the complications of the taxes...

I came to the conclusion that unless you can buy the property outright in the IRA it just wasn't worth the hassles, red tape, paperwork etc etc etc.

Plus, RE has many great tax advantages that you would be giving up when buying in a tax advantages account.

If I had $150-200k in the account, that would make things different. Then it would possibly make sense to re-characterize into a Roth and buy the property (for tax free cashflow)... Or buy non-performing notes...

But for my $50k? It boiled down to two choices; cash out, take the penalty and use it, or roll it into my 401k and take a loan against it.

As it happened I had about $40k in my 401k already, so rolling my $50k into it gave me $90k to work with, of which I was able to pull $40k out (not 100% vested yet) and use that for RE any way I want.