SDIRA lending and borrowing.

[Jerry Chilimidos]

Hello all, I have a SDIRA with some cash, 2 paid off properties and a stock portfolio in the SDIRAs name.  I was thinking about leveraging those assets as collateral and doing some hard money lending.  Is that a thing?  I have done hard money lending using my own money which has worked out well.  Has anyone else done that and also what lenders did you use.  Thank you in advance for your help. 

JC

[Dmitriy Fomichenko]

Here is some clarification:

When property inside of an IRA is financed, it generates UDFI (Unrelated Debt-Financed Income), the income derived from the leveraged portion of the property.

UDFI is subject to UBIT (Unrelated Business Income Tax). 

This tax is assessed on business income inside of tax-exempt entities or organizations (IRA falls into this category). An example would be owning a franchise. As explained above, income from the financed portion of the property in an IRA would be taxed as well, but you can deduct related expenses, including depreciation, to minimize this tax liability; that is why I recommend a discussion with a tax expert to understand what your numbers would look like.

Hope this helps!