Investing in VRs through a self-directed IRA

[Jeff Piscioniere]

Hello everyone! Has anyone done or thought of attempting buying vacation rentals through the investment of a self-directed IRA? Specifically, I have been researching the concept of a self-directed IRA LLC with checkbook control. This for all intents and purposes is a bank account in the name of your IRA LLC where you literally have a checkbook/debit card to invest in alternative investments one of which is real estate. Of course there is list of extensive IRS rules you must abide by but they are generally straight forward. I'm getting close to the point where I will be looking for "facilitators" (accountant; tax lawyers) that will help me roll over funds and set it up but I've yet to determine the best aspect of real estate investing to focus on. Any input will be greatly appreciated with regards to the focus on vacation rentals or if anyone has knowledge of the set up process with creating a self-directed IRA LLC with checkbook control including what that process may cost. Thank you in advance! Jeff

[Jessica Zolotorofe]

Hi Jeff! It's a complicated field, so you need to find an attorney and accountant familiar with the processes. First you should find a custodian to work with. Then have an attorney form the LLC and draft an operating agreement if you intend to use an LLC (sole member would have to be the SDIRA with you as the manager deriving no income personally). The operating agreement has to be very specific and include IRS regulations and rules regarding disqualified persons and transactions not allowed by the entity, the consequences of financing, etc. Next you have to find the property and purchase it in the name of the custodian FBO your IRA, or as the LLC that's sole member is the IRA. Important to make sure no family member invests with you, and you personally cannot contribute any additional funds. Also make sure you don't every vacation to the locations or benefit directly in any manner. All income and expenses HAVE to flow through the IRA. I know this is a lot at once, trying to give you a little taste of what you are up against so you hire the proper professionals to guide you, but hope this helps some. Happy to answer any further questions!