Self Directed IRA for A Syndication Investment

[Shane M.]

Hello BP Members,

I am planning to invest in a real estate syndication deal through my self directed IRA. The asset is an apartment complex and the goal is to hold it for a period of 4-5 years, make value adds to the property and receive rental income during this period.My self directed IRA will only be a passive investor (just a small contribution of capital towards the down payment)

The investment structure is that the syndicator and his partners will open a new LLC that will own the asset. Investors (my self directed IRA) will buy shares in that LLC. In terms of the borrower on the loan, the syndicator will be fully underwritten by the bank. He takes on the liability of the loan, not the investors (self directed IRA)

Will my self directed IRA be subject to UDFI and UBIT? 

[David Thompson]

Alina,

If the partnership is leveraging the asset, that is the portion that I believe Brian is referring to you. A lot of folks don't realize that the IRS does not give you a free pass to earn money inside your IRA off of the leveraged portion. I believe that is what is being shared by Brian. Whether inside a partnership like syndications setup or not, it would apply is my understanding.