Cashout Refi when using SD-IRA

[Tom M.]

Hi all, considering opening a SD-IRA with an old 401k account.

We'd like to use the SD-IRA funds for the down-payment to purchase a multifamily apartment building.

Come someone chime in on whether or not we will be allowed to execute a cashout refinance in the future in order to extract our initial investment funds, pay back the SD-IRA and then repeat the strategy?

[Brian Eastman]

@Tom M.

The way I understand what you are saying, probably not.

You do not use IRA funds on a purchase of a property that you own. The IRA owns the property. So, the IRA is on title and the IRA is the borrower on the loan.

Any loan to the IRA must be non-recourse, meaning no personal guarantee from you. Most non-recourse lenders want 30-40% down for 1-4 unit. Sometimes the requirement for down payment can be less on larger commercial deals.

You may not personally refinance or pay off the IRA.

In the future, once the IRA has built equity via appreciation of the property and paydown of the loan balance, there may be the opportunity for the IRA to refinance and pull some of that equity out to create more liquidity for the IRA.