Self-Directed IRA approach to RE investing

[Dave Godfrey]

Anyone have experience using their Self Directed IRA for a real
estate purchase?

I have some $ just transferred to a SD-IRA. I am looking to use the funds for a purchase. What vehicle would you suggest?

-Real Estate

-Notes

-Other

I heard that you cannot take depreciation inside an IRA. If true, it seems that it wouldn't make the most sense to purchase Real Estate.

Thoughts?

Thanks in advance for your responses,

Dave

[Ellis San Jose]

@Gautam Venkatesan

Here is a simple example of an option transaction. There are many variations.

John Smith has $2,000 in his IRA.

John finds a seller willing to sell a house for $100,000 but it's worth $200,000 in top condition. John negotiates with seller to allow him 30 days to close & acquire the house. In exchange for the $2,000 money up front, which is deposited into an escrow account & applied to the purchase price.

Seller agrees to the terms.

John creates an option for $2,000 which will give him his IRA right to buy the property for $100,000 as long as he closes in 30 days.

John calls his friend Kristine who is a rehabber & is willing to pay $120,000 for the house. He sells his option to Kristine. Kristine closes within the 30 days & pays the John's contract price of $100,000 plus the $20,000 for the option for a total of $120,000.

John turns his $2,000 option into a $18,000 tax deferred profit (900%) in his IRA (or tax free in his Roth IRA)