SD IRA Investment Question

[Roman S.]

Trying to decide on the best investment strategy for my SD IRA account and would love to hear thoughts from more experience folks. For this one I would love it to be more passive. If I had 100k in my SD IRA, does it make sense to get a non-recourse loan (~50% down) and get a turn key Single Fam rental or try to find a Single Fam I can buy all cash? Would this type of loan count against my max of 10 loans permitted? Any other recommendations for eligible longer term passive investments that I could do (Syndication?) that provide decent returns? 

[Brian Eastman]

@Roman S.

Using leverage inside of an IRA is a trade off. On the plus side, you have the potential to expand your purchasing power and create higher cash-on-cash return. On the other side, you add risk and complexity. The IRA needs to pay the mortgage every month whether there is a tenant paying rent or not (risk). The use of debt-financing in an IRA also creates exposure to taxation on Unrelated Debt-Financed Income (UDFI) - (complexity). Of course, the IRA simply pays a CPA to deal with the taxation, but keeping records and interfacing with the CPA is more work than an all cash investment would be.

As Carl noted, the borrower would be the IRA, not you

There is also the question of whether you seek our your own investment (more work) or tap the expertise of an investment professional in a turnkey model, syndicated commercial property deal, or private fund in real estate or notes  (less work once you get past the research of finding the right partner/opportunity).