Flipper/Rehabber · Lake Isabella, CA · Member since 2011 · 974 posts · 488 votes
I have a family friend that owns a rental home in a SD IRA. The tenant is behind a few months so they served a three day notice. After a couple weeks of unfulfilled promises they took the paperwork to the court house to start the eviction process. The court clerk told them that because its a trust they need to hire a lawyer and basically would not even look over the paperwork.
Is this common for a SDIRA? Is it possible to handle an eviction on your own without an attorney or it is a basic requirement when investing in a SDIRA?
I have advised them to settle with the tenant. I am not sure what they will do but either way I am curious if the court clerk is correct that a lawyer is required for evictions in a SD IRA.
Specialist · Westlake Village, CA · Member since 2010 · 1k+ posts · 781 votes
12y
Another reason why owning real estate in your IRA can be treacherous. The IRA must pay for all legal fees with IRA funds. Plus by appearing for the IRA it may violate prohibited transaction rules.
I believe the court clerk is correct. Only the owner can represent themselves in court. Any entity requires an attorney (the IRA is an entity not an individual).
Specialist · Westlake Village, CA · Member since 2010 · 1k+ posts · 781 votes
12y
Another reason why owning real estate in your IRA can be treacherous. The IRA must pay for all legal fees with IRA funds. Plus by appearing for the IRA it may violate prohibited transaction rules.
I believe the court clerk is correct. Only the owner can represent themselves in court. Any entity requires an attorney (the IRA is an entity not an individual).
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
12y
Depends on the state, but could well be the case. An attorney would be able to provide a definitive answer.
Even if your friend can represent the IRA its probably not a good idea. Their efforts could be considered a contribution by the IRS.
Personally I wouldn't even do an eviction for a property I owned directly. Too many ways to mess up. An attorney is cheap insurance.
IMHO they need to either hire a property manager or sell the IRA's property. A tenant being "a few months behind" tells me they aren't cut out to manage properties. Especially in a tenant friendly state where a smart tenant can stretch out the process for a long time.
Flipper/Rehabber · Lake Isabella, CA · Member since 2011 · 974 posts · 488 votes
12y
Thanks for the input.
When I searched for this online, there was very little information. There is mostly fluff pieces boasting about all the advantages and very little talking about the potential disadvanatages.