Transfer real estate asset from LLC to self directed IRA LLC?

[Henri Meli]

A few months ago, I purchased a real estate asset under an LLC. I put down 25% or a total of $100k.

Recently, I learned about self directed IRAs and thought it could be quite useful to me. I do have a 401k with my current employer with about $150k in mutual funds investments. My 401k doesn't allow me to do self directed IRAs. And I cannot move my 401k into an IRA, unless I quit my current job. I have been thinking about changing jobs. When I transition to the new job, I will have the opportunity to move my 401k into an IRA and therefore have access to a self directed IRA.

Couple of questions: Is it possible to transfer the current asset into a self directed IRA? Does the self directed IRA have to cover the complete asset and/or can I finance the difference through a bank loan? The reason I want the real estate asset in the self directed IRA is because there is not a lot of flexibility of what I can do with the retirement funds tied in a 401k or IRA. If I can move this asset there, I can free up the down payment I made earlier and use it on other forms of investments.

Any thoughts on this strategy?

[Brian Eastman]

@Henri Meli

I'm not sure either of the above posts provided a clear and direct answer to your questions.

Once you change jobs, you can move those funds to a self-directed IRA.

The IRA may not, however, take over the investment that you have made personally. That would create a self-dealing prohibited transaction.

The IRA could purchase a different piece of real estate. Financing such as a mortgage can be used with the IRA. The mortgage needs to be non-recourse (no personal guarantee from you). The use of debt-financing within an IRA does create minimal tax exposure known as UDFI.

So yes, something to research further and speak with some professionals about.  And, yes, a way you can likely put that tax-sheltered savings to better work... but not into your existing personal deal.