IRA loan for SFR investment deal.

[Josh Longtin]

My wife and I have found the deal we have been waiting patiently for. Ultimately, we would like to use her IRA to fund the deal (flip). Has anyone had experience doing this? I am not familiar with the legality and tax position we would be in. (We are in MA)

How would this be different than fundraising with a private investors IRA?

Thanks in advance.

[Glenna Wood]

First learn the SDIRA rules on self dealing and disqualified parties. If you pass those requirements, then find a SDIRA custodian. Move her IRA into it. Set up a checkbook LLC. Have an attorney draft the promissory note and mortgage with your terms. (I'm assuming you will do a note secured with the property). Close, file in the local county court. Collect all the payments. File a Lien Satisfaction for the note when paid off. Your LLC can service the loan, ie, collect and deposit loan payments, report interest paid to the IRS. No tax implications as you will NEVER touch a penny of it outside of your IRA. No taxes until you request a 1099-R distribution out of your IRA (unless you have a Roth). You can skip the checkbook LLC but depending on the custodian they might charge transaction fees to deposit incoming payments.