SD IRA for Shore Real Estate Rental

[Bryn Wilden]

So my wife and I (39 and 40) were looking at purchasing a rental property at the NJ shore with some of our assets. We found a property and got pre-approved for the mortgage. Then BANG, we talked to our financial advisor who told us that we would need to raid our IRA for the down payment on the property. Our account confirmed that it would not be a wise decision. I told my wife that I would not throw $20-30k out the window in taxes and penalties to buy the property. So then I found some info. on Self Directed IRA's investing in real estate. The info I received from Euity Trust seemed to be nearly ideal for our situation. We buy the property, all expenses and income go back into the IRA - it is an investment after all, and we have a house we can possibly retire to in 20+ years. However, the purpose of buying a shore house is for rental income AND ability to use it for a week or two in the summer. Equity Trust told me that is not a viable use, since they would be the custodian, and we are not permitted to use the property. So I countered what if I stayed overnight there during a winter weekend because I was visitin Atlantic City? Same answer. However, when I asked what the penalties would be, and how the IRS would discover this "violation," there was no answer. How exactly would this type of violation be discovered, since I doubt there is a roving dark van scouting these properties, and if caught, what are the penalites? Slap on the wrist, bad boy, or is it a crime, or would they charge me a disbursement? Thanks for any guidance. Also, does this seem like a legitimate investment? I cannot find much info on this except on the web. My financial advisor and accountant were very unfamiliar with these vehicles.