All Forum Posts by: David B.

I understand the nature of a prohibited transaction, as I mentioned, which is why I was considering an alternative arrangement. 

For such a small purchase it will probably just be easier for me to pay personal cash for the whole thing.

Thanks for the replies.

David

Hi Everyone. 

We bought a house about a year ago with a SD IRA. It was a more complicated process than I expected, but it worked out fine. We have a nice property and a reliable tenant that is paying the rent on time. I got a lot of great advice here on how to do it. So I am fmiliar with the process.

I have a little leftover money in that IRA, and am eyeing a piece of rural land to eventually use as a weekend recreational getaway. I understand I can't use the land until I distribute it from the IRA. I have enough in that account for about 1/2 the purchase price.

I am trying to figure out how to pay the other half of the purchase price with personal cash, and am assuming the land would have to be divided: 1/2 owned by the IRA and can't be touched by me, and the other 1/2 owned by me free and clear.

Presumably I would need the seller to get it divided in advance of the sale. I have no idea how difficult this would be, and how much effort is involved, and if the seller might not want to bother. Or is it something really simple like going down to the town clerk's office and filing a new title or deed? I don't know much about the whole process.

This is a small-potatoes purchase, not involving a lot of money.

Any suggestions?

Thanks,

David

This is what I'm trying to figure out. I was hoping that using a custodian might actually remove a level of complexity, by having them manage some IRS and banking and paperwork stuff.

Since I will be out of town from the property and won't be able to write checks on the spot anyway, I figured what's the difference who writes them as long as they get sent out right away. I realize this time factor is very important.

Thanks for the replies. I appreciate any further insight.

David

We are getting ready to purchase our first investment property, a single family house to rent, using a self-directed Solo 401 K.

At first I was leaning toward having checkbook control, but the cost for a custodian-managed account is reasonable, and I am thinking it might be good to have a custodian take some responsibility for paperwork and banking.

What are the disadvantages of using a custodian, other than the slightly higher annual cost? The one I'm considering does not charge per check, so that is not a concern. I assume I can get checks issued very quickly if I am making an offer on a house.

I appreciate any help or suggestions.

David

Good point, Mike. I think I have a general feel for this, but definitely will need to study the laws. This would be in Florida, so I'm hoping it might be a bit more landlord-friendly there than here in the northeast.

David

That sounds like a potential nightmare, essentially giving the tenant a blank check to call repair guys anytime they want, for any frivolous reason. I think I'd like to approve any repairs first.

David

That makes sense. But is there a way to do this? Is there a way, for instance, to purchase an airline ticket from within the account? Even if it were legal, I can't imagine how.

This is written off from my business? (currently a DBA but soon to be converted to an LLC).

David

Sorry in advance for the long post. I've been educating myself quite a bit on the forums here, but I'm also looking for critique or approval of our plan, and suggestions.

We are shopping for a nice house in Florida (Treasure Coast) to rent out and possibly use in our retirement someday. We are up in the Northeast.

My initial plan was to have a property management company handle all the details of renting and maintaining it. But I'm finding that the cost (like other things in Florida) is higher than I expected. Most property management companies charge 15%, which wipes out most of the profit we hoped to earn on the rental.

I have heard all the reasons not to manage a property myself, but would like to hear from anyone supporting my plan. Here's why I think I could make it work:

1. I'm comfortable with contracts, legal stuff, and business transactions.

2. I have a good mechanical and construction knowledge. I am comfortable hiring contractors, and am pretty good at sizing them up as far as their abilities and integrity. I can speak their language, and understand the technical aspects of what they do.

3. As far as dealing with tenants, I'm a pretty good judge of people, but also am empathetic to a tenant's needs. I believe I could strike a good balance between having a friendly business relationship while being able to make tough decisions like evicting someone.

4. Today, with the internet, I assume a lot of the screening process for both tenants (credit and criminal check, etc.) and contractors (Angie's List, etc.) can be done long-distance, and easily. There also seems to be a wealth of knowledge and tools available on-line.

5. We are planning to cater to a middle-class demographic, which we hope will avoid many of the lower-income issues.

I realize I still need a local person. I have an idea that I should be able to find an independent handyman to do real simple stuff- change the A.C. filter, turn off the water in an emergency, check the circuit box, give access to repair guys, etc. And also to be a set of eyes to check on both the tenants and contractors. Like a free-lance super, on an hourly basis. Especially in Florida, I picture there being a lot of these independent or semi-retired handymen around. Heck, if I was retired, I'd do this myself for people for a little extra cash.

I'd establish relationships with contractors in advance for urgent repairs: plumber, A.C., appliances, maybe an electrician, maybe a hurricane-prep guy.

For larger repairs, like tile or a roof or bath remodel, I would travel down to manage it. My work schedule is pretty flexible, and to fly down every now and then to hire a contractor or manage some project at the property is reasonable for me. I would probably also travel down to show the house to potential renters, and size them up personally.

OK: Let's have constructive criticism, suggestions, as well as positive experiences from people who have done this. I appreciate any help!

Thanks,

David

That makes sense now. So you can definitely lose the entire amount the IRA invested in the house, but the bank can't go above and beyond that.

Do you mean that buying real estate in general is a poor use of SDIRA funds? I have spent some time reading the forums here, but it sounds like I will have to dig deeper. This is the first I've heard this.

Thanks for the reply.

David