Rental Property Investor · Reedsburg, WI · Member since 2011 · 1k+ posts · 857 votes
Hello,
I am going to be setting up a SDIRA this week to purchase my first rental property. Currently I invest in mostly stocks within my ROTH IRA, which I will be rolling over into the SDIRA.
My question is this;
1) I will likely have some 'left over funds' in the SDIRA after purchasing my rental. Will I be able to invest the 'left over funds' the way I have in the past? If so, how does that actually happen, as in what Brokerage would I use, etc....
2) If it is easier to keep the 'left over funds' NOT in the SDIRA, can these 'roll both ways'? Meaning if I sell a property, could I roll the funds back into a 'regular IRA'?
So first: This is not legal, tax, retirement or investment advice.
Ok so now to answer your questions based on my experience with having a SD Roth IRA, and researching various options.
1) Yes if you have a cash balance that you would like to invest into something else you can. The actual details are going to have to be ironed out with your custodian, mine allows tax liens, notes, stocks, bonds ect. How to accomplish each one of those may vary.
For example tax liens (the ones I have looked at) you have to fund with ACH which isn't possible directly from the acct. So they have a specific process to accomplish this. I would tell them how much I expect to purchase they fund a bank account in the IRA name that I am given the information for. I will give that info to the county and purchase as many liens as I can/want at the auction, and then within I think 5 days I have to provide the custodian with asset purchase form with the actual liens purchased info and they now complete anything else necessary and close the "extra" bank acct.
So how you can actually accomplish the specific investment you want is going to depend on the administrator and what their process is.
2) Not sure exactly what you would want to do here. You want to keep both accounts and then would rollover back and forth between them correct? I know there are some rules with accomplishing this between different types of accounts (traditional vs ROTH). Honestly I would attempt to avoid this if at all possible. I'd keep it simple and find someone who can complete the investments you want in a single account.
I hold 2 rentals in my IRA, and I will tell you you may want to rethink this strategy. While it is not a bad investment you mitigate some of the benefits that you can have with RE like leverage unless you deal with UDFI (unrelated debt financed income), and depreciation ect. I may purchase more rentals in my IRA, but am really leaning to investing in other things like notes and keeping rentals in my personal portfolio where I can maximize the additional benefits I can get from RE.
Not saying your plan is a bad idea, just wish I had understood some of those things earlier and planned my IRA investing a little differently.
I hope both accounts are Roth accounts as you cannot roll a Roth account to a traditional account. Yes, you can invest it just about any way within law.
My advice is to keep a significant reserve in case of major unexpected repairs.