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Self-Directed IRA
I have many different opinions on the mgmt of property in your SDI.
I have been told the IRS does not allow you to be an on-hands mgr. If a small property (condo, SF, ) it does not pay if you have to hire a mgr. Any and all responses, I thank you.
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#3 Real Estate Deal Analysis & Advice Contributor
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- Mercer Island, WA
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#3 Real Estate Deal Analysis & Advice Contributor
- Rental Property Investor
- Mercer Island, WA
Bob, You may be asking for something that just does not exist - definitive answers, chapter and verse. AFAIK, there are no specific regulations that say exactly what you can and cannot do. I have read advise in books on this topic that you must pay for property management. Yet I have legal advise which I paid for that says managing a property would not be a problem because the effort involved is minimal. So what's the right answer? Until someone actually runs a case through the tax courts I don't think anyone knows for certain.
There are a couple of issues involved. One is that you as the IRA owner cannot benefit from what the IRA does. So, you certainly cannot have the IRA pay you a 10% property management fee, since that would be a benefit. The same attorney I mentioned above also recommended against buying property near any property I owned in my name, as this might be interpreted as benefiting my property if the IRA improved the value of another property.
OTOH, any work you do on a property owned by an IRA would be considered a contribution. Its not that you can't do that, it just subject to the normal contribution limits. So, buying a house and fix and flipping it would be outside the limits. Doing maintenance on a rental property the IRA owns would also be outside the limits. OTOH, according to my lawyer, handling the property management would not be. What's the absolutely definitive answer? Beats me.
If you want a firmer answer, find a lawyer that's knowledge about these areas and follow his or her advice. That way if you get taken to court, you'll have someone to go with you.
An IRA certainly can borrow money. It just cannot borrow it from you or any other disqualified party. And you cannot give any personal guarantee for the loan.