Self Directed IRA Partnering with Myself and Getting A Loan

[Wendy Doris]

Hello. I've just learned that my SDIRA can partner with...ME! Compliance people at my SDIRA co. say yes you can personally partner with your SDIRA so long as you aren't self dealing (purchasing something from yourself that you or a family member already own).

Questions:

Option A: Can my SDIRA and I go in on a conventional mortgage? The IRA would fork over the down payment.

Option B: Same scenario but with hard money loan?

Option C: I'm nuts. This can't be done.

Please don't say C.

[Matt Devincenzo]

Do a search for some past threads that have asked similar questions as this has been brought up before. I am not an ERISA attorney nor is this legal advice, but I do have a SDIRA and have a good understanding of how they work legally speaking. Below is my opinion on your scenarios.

A) Definitely out. Financing for your IRA must be non recourse, a conventional loan is recourse and as such your IRA would be materially benefiting (read prohibited transaction) from your personal guarantee (assuming you somehow could get a lender to agree to this, though that would be highly doubtful).

B) Basically like A. If your IRA was to get a loan it would have to be non-recourse eliminating the need for you to partner. So the only reason to partner would be for the personal guarantee aspect which again would be prohibited.

C) Not nuts, but no can't be done as you've proposed. If you want to borrow in your IRA just do a straight non-recourse loan. There are lenders that do them, just understand that you will be bringing UDFI into the picture and the taxes on the income that will result.