Can I use SDIRA to purchase a home and rent to a sibling?

[Silviano Gaona]

Hello,

Can I use SDIRA to purchase a home (manufactured home) and rent to a sibling?

If so, in the future is there any issue if the sibling purchases the home? Can you do a lease to buy option?

What if any restrictions or gotchas are there?

Thanks in advance.

Regards,

Silviano

[Brian Eastman]

@Silviano Gaona

A sibling is not considered to be a disqualified party. As such, your IRA can transact with a sibling.

There are concerns, however.

There can be no direct or indirect link to a disqualified party to your IRA, which includes lineal family (parents, grandparents, children & grandchildren). So, if your sibling were to become a caretaker to a parent for example, now your parent who is a disqualified party is benefiting from the IRA and that would be a problem.

You must act in the best interest of the IRA and cannot give your sibling special terms. The IRA needs to treat them just as any other investor, charge market rent, evict if rent is not paid, etc.