Need help understanding a self-directed IRA

[Drew Castleberry]

So I've scoured BP and the web on self-directed IRAs and have gotten a bunch of useful information. Unfortunately the information I was able to find was mostly on setting one up and general guidelines on how to operate one, mostly within the rules of the IRS.

Here's my situation - In January I'm moving to a different group within my company, and unfortunately I won't be able to keep my current 401k, the new group offers a different one. So I have the option of rolling it into my new one (which isn't very good), or doing something else with it. What I want to do is roll it into a self directed IRA so I can purchase real estate with it.

But here's the kicker, I don't have enough in to 401k to purchase cash for any properties. I currently have about $35k in it, which would be more than enough to purchase a couple town homes by the local college that will produce good returns, and that's my plan for using the money.

However, what I don't know is can you obtain a mortgage through a SD IRA? And how would the logistics of making all the mortgage payments, maintenance fees and other costs work? I certainly wouldn't want to have to pay fees to a company handling the IRA to make those transactions.

Can anyone clarify any of this for me?