(Yet Another :-) SDIRA LLC Prohibited Transaction Question

[Angie Menegay]

Hi experts,

There is a property I'd like to purchase (for sentimental reasons) to live in in about ~5-8 years. Due to the current high mortgage rates and low rental rates in the area, it will bleed me alive if I purchase and finance 80% of it as a rental for the next ~5-8 years (probably negative cash flow of ~$1500/month due to interests).

I have enough funds in my Roth SDIRA (with checkbook LLC) to purchase it outright and rent it out for the next ~5-8 years (break-even) until I'm ready to move into it. I totally get that it's a terrible investment (again it's because of sentimental reasons).

I presume selling the property from the SDIRA LLC to me in ~5-8 years will be a prohibited transaction? If so, I don't know how to lock in this property now to allow me the ability to live in it in the future :-(. Any suggestions on how to approach this would be greatly appreciated.

[Brian Eastman]

@Angie Menegay

You cannot directly or indirectly buy a property from your IRA. That is a prohibited transaction.

After age 59 1/2, you can distribute the property from the IRA to you. Since it is a Roth IRA there will not be taxes, but you will be depleting your Roth IRA for this purpose. That is probably not the best use of your Roth IRA.