How much to set aside for capex in a SDIRA

[Pearce G.]

If I own rental property in a SDIRA, and I have a major expense that exceeds the available cash and also exceeds the annual contribution limit, how do I pay for it?  Wouldn't it be a prohibited transaction and/or an unqualified contribution to pay for it personally?  Do I need to keep 15%-20% cash in the SDIRA to make sure I can cover a major repair?

[Dmitriy Fomichenko]

Pearce,

paying with the personal funds for the expense on the property owned by your IRA will be prohibited transaction. You have few options:

- Make maximum allowed contribution for the last year and 2018

- Bring in a partner by selling portion of the property to another investor (must be someone who is not disqualified) 

- If your IRA owns the property free and clear you can do a cash-out refinance

- Your IRA can get a loan to pay for this expense

The amount you need to allocate for capex will depend on individual investment, it would be different for 70 years old property compared to 15 years old property.  You have to do your due diligence including property inspection prior to the acquisition of the investment which will help you decide how much $$$ to allocate.