Self Directed IRA Partnership for Flipping

[Adrian Smalls]

Hello everyone! I have a quick question. What is/are the best way(s) to set up a Self-Directed IRA when I am the rehabber but I have individuals who want to act as a Lender.

I am paying for the Rehab and managing the contractors however they are issuing funds for the purchase price.  

How does this work when you go to purchase/sell the property?  Can you have two entities as an owner when they are using their SDIRA?  

Any insights would be great!   

PS. I am looking for a company that can assist my clients and I... 

[Brian Eastman]

@Adrian Smalls

It is best for an IRA to be a lender on flip transactions. Having an equity split of flipping profits as a co-owner on the deal could create taxable income to an IRA known as UBTI.

You or your entity will be the property owner.

The IRA will lend to you or your entity, with a note secured by the property. Have this documentation prepared and recorded by proper counsel in your state to ensure the security of the investor's capital and that the terms of the note are in compliance with state usury laws.

You or your entity will pay any points/fees, principal, and interest to the IRA based on the terms of the note.

The IRA receives this passive income fully tax-sheltered.