Private Money & SDIRA - Borrowing Prior to IRA Setup

[Account Closed]

Hi BP. I am in a bit of a pickle.

I am awaiting a response from my custodian and thought I'd throw this to the community for discussion.

A wholesaler has a contract I want to acquire and requires a $3k non-refundable deposit. I have just initiated a self-directed IRA that is still processing. It will at be least another day before the account is finalized and at least 2 more before the rollover happens. I am planning to borrow private money to pay for the property.

The IRA contains the money I want to use for a down payment to the wholesaler and to the lender. I am on a time crunch because I don't want to lose the opportunity.

Is it possible to borrow the $3k non-refundable deposit from the private lender now and pay him back at the closing table with the IRA funds?

[Dmitriy Fomichenko]

@Account Closed

when you say "Is it possible to borrow the $3k non-refundable deposit from the private lender now and pay him back at the closing table with the IRA funds?", are you referring to you personally borrowing the funds or your IRA be the borrower?

Technically, your IRA can borrow money from the private lender for this transaction (or any other investment), however the IRA is not yet established according to your notes above. If the wholesaler can wait until the IRA is established and you get the funds (either for the rollover or for a private loan) - this might be doable, but still difficult to accomplish since you have to have your custodian involved and that takes time, that's why Checkbook IRA (also known as IRA owned LLC) make sense. But if they want the money now - that would mean you personally have to pay them, and of course as a 'disqualified person' this would not be allowed. Remember that all transactions involving your IRA must be 'arms length'.

Good luck!