Fix and Flip Calculator use of IRA Funds

[Charles Brown]

When using the fix and flip calculator where would I capture repayment of IRA funds used to cover rehab costs? For example, if I plan to use $20,000 from my IRA to cover some rehab costs, where does that get recorded in the fix and flip calculator analysis to account for those funds being returned to my IRA after the property sells? Are they just part of the estimated rehab costs number I used or should I be doing something additional?

Thanks.

[Dmitriy Fomichenko]

@Charles Brown there are few important things you need to be aware of when investing using self-directed IRA:

• All funds for the purchase and for the rehab must come from the IRA, you can't use personal funds in the connection with the deal of your IRA
• If you are financing the purchase, the loan must be non-recourse. Conventional loan would not be allowed since as disqualified person you are not allowed to provide personal guarantee. Non-recourse lenders typically require 40% down-payment and 10-15% reserves
• Here is a list of lenders offering such loans: https://www.biggerpockets.com/blogs/2810/50272-lis...
• If you are using custodial self-directed IRA - you will be the account owner, but will everything must flow through the custodian, they must sign all paperwork and disburse all the funds
• If you wish to be able to handle all transactions directly, consider using Checkbook IRA
• Flipping activity is considered an active business. If you run an active business in your IRA - all gains and profits will be subject to Unrelated Business Income Tax, which tops at almost 40%. Your IRA will owe this tax bill. Be sure to consult with a tax professional experienced in this field
• If you are self-employed or own a small business, consider truly self-directed Solo 401k plan instead. It has many advantages over an IRA: not subject to UBIT tax on leveraged real estate, contribution limits are 10X higher, ability to take personal loan from it up to $50K, lower cost, tax-free investing using Roth sub-account grater protection and more flexibility

Hope this helps!