Self-Directed IRA and BRRRR

[Chris Chappell]

Is it possible for a person to use their own Self-Directed IRA to buy and rehab a house, then get it refinanced to pull the IRA money back out as a method of buying a rental property? If so what would be the difficulties and pitfalls of using this method? Can you just pay back the amount borrowed from the IRA without needing to pay interest? Would this just be more complicated than its worth considering other financing methods available?

[Carl Fischer]

@Chris Chappell

Yes an IRA can loan money to a non-prohibited person, however, your IRA can not loan to you as you are a prohibited person. As @Travis Sperr said, you can not personally benefit from your IRA, nor can your IRA benefit from you.

A prohibited person is you, your spouse, your family that is linear to you (Mother, Father, GrandParents, children). A prohibited "person" is also a business/entity you own 50% or more of.

Here are three structures that might be helpful for you if you intend to use retirement funds on your deal.

1. You recieve funds from another private lender in the form of a note. You and the lender sort out the terms. Private lenders can be found at investor groups and through networking.

2. You use your IRA to purchase the property, the IRA is the owner of the property. As @Eric E. explained, your IRA can take out a non-recourse loan.

3. Your IRA can partner with another IRA or lender to purchase the property.