SDIRA strategy

[Chris Haas]

Bare with me, I'm about 1 week into reading about SDIRA.
Seems to me it's not a great way to buy real estate for buy/hold, however it does appear to be a nice way to be a private money lender.

I can see a mutually benefit scenario where two friends / investors allocate say 100K each in a self directed IRA and lend to one another to purchase REI property. I realize this can't be family, but a close friend / investment partner. I can see doing up to 100% financing for someone knowing that if they don't pay me, I simply won't pay them. Also assuming they have some equity in the ARV value of the deal itself.

Am I missing something? Is this a decent strategy?

[Jeff S.]

First, and not to divert too much, we used Mat Sorensen at KKOS when we started lending and we were extremely disappointed. You don't necessarily need a lawyer to answer IRA questions. For questions like yours, I would first ask my CPA or SD IRA administrator (or come here). They could refer you to an attorney if they couldn't provide an answer. In this case, your question is actually easy.

The general rule is you can't personally benefit from an IRA investment. Any money earned must go back into your retirement account. By loaning to one another, your clear intent here is to evade this rule which creates a prohibited transaction.

Here is a related thread: http://www.biggerpockets.com/forums/311/topics/97395-self-directed-ira-swaps