First deal breakdown and questions using my SDIRA

[Michael Mies]

I’m using my SDIRA to fund the purchase price of my first RE investment:

·Purchase = $74K (w/closing cost)

·AVR = $145K

·Repairs = $25K

·Anticipated Lease = $1,250/mo (NOI of at least $700/month)

I have $82K in the SDIRA (I’ll need to obtain outside funding of $25K to cover repairs and maintain adequate reserves in my SDIRA).

Option 1 – Obtain non-recourse "cash out" loan (5/1 ARM, 15 year, 4.875%). Every bank I've consulted has a $50K minimum loan restriction. Assuming there's no prepayment penalty I could make a first monthly payment of $25K and then continue to make monthly payments of $700/month until paid-in-full (37 months +-). Total closing ($3K) and interest ($2.3K) paid during this period would total approximately $5.3K. In effect, I'd be paying approximately 7% interest (annualized rate) for the $25K.

Option 2 – Obtain a similar loan with a private investor (for only the $25K required for repair) and pay off in three years.

Although I initially discounted option #1 (upfront costs seemed excessive and I didn't like the concept of borrowing more than I actually needed), I'm now seriously considering this option… but with a twist. I could use the "extra" $25K as leverage on other investments. The only downside (other than the obvious of leveraging IRA-owned properties) however, is that I may decide to flip the property if a buyer comes around with an attractive offer (anything over $140K) during the first six months following rehab.

Any other options to consider or critical feedback?