Using SDIRA for flipping, looking for mentor

[Ray Li]

Hi follow Dallas investors, my name is Ray, I'm an out-of-state investor from California, and I'm considering using my IRA funds to flip and sell houses in the Dallas area. I'm looking for an investor who has done the same thing (using SDIRA to flip) and has time in the next few months to help me through two or three flips, in exchange for half the profit on each flip.

I have around $130k in my IRA, so I'd like to target 3bd/2ba or 4bd/2ba SFH's with a purchase and rehab price of around $120k (leaving room for errors) with an estimated ARV of at least $150k. I've already started a direct mail campaign in the Garland area, which should be a decent area that fits my above requirements.

To be specific, I have a rental property already but I've never rehabbed a house before, so I will need help with everything including:

• How to set up an SDIRA and use it to fund a purchase
• How to set up a legal entity for a partnership to split profits.
• How to perform thorough due diligence on the house.
• How to select good general contractors and how to evaluate their bids for extensive rehabs.
• How to manage rehab progress as an out-of-state investor.

Let me know if anyone is interested in this, or whether or not I need to make any changes to attract experienced investors.

Thanks,

Ray

[Linda Weygant]

Originally posted by @Ray Li:

@Dmitriy Fomichenko So I only need to pay UBIT taxes (with no other penalties) if IRS decides to audit me? If they don't audit me, I have no obligation to pay taxes from flipping with SDIRA funds?

@Ray Lai I've seen quite a few conflicting information on the forums, some people saying you shouldn't flip using SDIRA funds, some people saying that you can as long as it's only a few houses every year.

I know I don't have a lot of experience, that's why I was hoping to partner with somebody who can guide me through the process in exchange for some equity in the deal.

Thanks,

Ray

 The IRS will definitely find out what you're doing and audit you.  It's done very easily and happens all the time.

When you sell real estate in an entity (LLC, Corp, Trust, IRA, etc), the title company will issue a 1099 to the entity which includes the date of sale, the gross amount of sale and some other identifying information, including the EIN of the seller. When the IRS does not find a tax return in their system that matches the 1099, they will begin to send inquiry letters. It generally takes them anywhere between 9 and 24 months to start their inquiries.

I don't know where you heard "If they don't audit me, I have no obligation to pay taxes" line from.  That's a real Al Capone statement right there.