Custodian due diligence

[Inderpal Chadha]

Hello BPians

I am closing on a house in a week and plan to use my IRA funds for down payment.

I am considering using Mountain West IRA out of Idaho and I am based in Seattle area. Has anyone used this company before? Please let me know your experience. Also how can one be sure that the custodian will take care of money and the money will be available when needed to invest, if the custodian goes out of business, are the funds lost or still can be accessed.?

Thanks

Inder

[Dmitriy Fomichenko]

@Inderpal Chadha 

While I can't tell you anything about Mountain West (I don't have any experience with them), I'll try helping you with your pending transaction. 

Since you don't have self directed IRA set up yet and have property in escrow I'm assuming that you are buying this property in your name and not inside of an IRA. If this is the case - you can not use IRA funds for the down payment.

If you choose to set up self-directed IRA and use those funds for real estate purchase, you can finance it but the loan must be non-recourse. You can not use conventional loan since you are not allowed to provide personal guarantee with self directed IRA.

Also you need to be aware that leveraged real estate inside of a self-directed IRA will be subject to UBIT (unrelated business income tax). A better alternative for this and several other reasons can be self-directed Solo 401k if you qualify for it.

With Solo 401k you can buy property in your own name and use your retirement funds for a down-payment by taking participant loan form it (not available with SD IRA).

Hope this helps, let me know if you have any other questions.