Buying a Rental with your Roth IRA

[Collin Parody]

Hello, I am posting to see if anyone has had experience with a lender that specializes in loans for Self Directed IRA's? I finally pulled the trigger and moved my Roth away from Wallstreet! As I analyze investment options, I am just curious to see if anyone else has executed this and has any input.

Thank you for any replys, Happy New Year!

[Brian Eastman]

@Collin Parody

There are a handful of lenders that specialize in non-recourse loans and are familiar with IRS guidelines.  Not all will lend in New York.

First Western Federal Savings

North American Savings Bank

Solera National Bank

Titan Bank

Be sure to check with your plan provider and tax professional to understand how leverage works in an IRA. The portion of income attributable to the borrowed funds in the deal is taxable as Unrelated Debt-Financed Income. You will want to understand both the tax impact and the administrative requirements surrounding reporting and your IRA paying the tax.

The net result is that your IRA gets to use leverage and create higher cash-on-cash returns as a result. The tax on UDFI will put a dent in the boost that leverage provides, but will not come close to canceling out the benefits of investing using other people's money.