SDIRA with My Father's Retirement Account

[Chuck VanDyne]

Hey Everyone,

Situation: I am 25 year-old living in Rochester, NY with a Bachelors in Finance. Licensed RE Agent (although I do not do many deals) Work full-time (25k salary). One of my father's retirement account from Kodak (Savings and Investment Plan) consists of $20k. He has very little financial knowledge and wants me to take the money and invest it for him and naturally i have chosen real estate. Keep in my mind I have never invested in real estate, only research for 3 years. 

My Plan:

1. Open a Self-Directed IRA

2. Establish an LLC

3. Transfer the 20k from my fathers retirement to his Checkbook SDIRA

4. Use the money to invest in fix n flips or buy and hold properties. 

Questions: 

1. I'm assuming the LLC, SDIRA, and Bank account have to be in his name. How do I get access to the funds without breaking IRS rules.

2. With the Checkbook IRA, how does this affect my ability to receive loans from credit union or banks.

3. Can I partner up with someone and split costs to buy and rehab? If so, how does this affect my tax situation when I sell the property for a profit since my partner is paying tax and I am not?

4. I've read about a SOLO 401k however, i am pretty sure we would not qualify. I do not actively work any deals as a RE agent and we both have full-time jobs.

5. Managing the property? I can't manage the property because I am a disqualified person (his son), correct?

*Most of my research has been done on BP, Dimitri's site Sensefinancial, and also a bit of Kaaren's UdirectIRA.com. 

*Bottom line is...What is the best route for me to take? I want to take my dads retirement fund of 20k and invest in real estate. 

Thanks in advance for feedback

[Dmitriy Fomichenko]

Chuck, I agree with Brian that you need to discuss specifics of your personal situation with the expert instead of trying to get the guidance on the forum. 

With the limited amount your father has in his IRA and also given the fact that you don't have any real estate investment experience it would be best for you to consider looking at some other alternatives such as investing in real estate notes. This is really passive and will not require experience except doing your due diligence on the borrower and underlying property which will be the security for your loan.

Investing in notes requires very minimal involvement of the investor so this way you probably will not need the checkbook control - keep your set up cost down. You can alway add that later once the account grows. Just find a custodian with reasonable fees and that might work well for you (I'll be glad to give you a recommendation). 

Also, keep in mind that income from flipping inside of your IRA (or IRA LLC) will most likely be subject to UBIT - this is the tax that is assessed when you engage in active business within your retirement account.