Let me get these details straight:
A medical resident attends an investment conference in Las Vegas, and buys a condo he has never seen.
He uses his paltry Self-Directed IRA money (subject to all of the restrictions on co-mingling funds, withdrawal penalties) and borrows in a loan structure that is non-recourse (necessary for his IRA funding use) with a 5% interest rate for 5 years.
The property cash flows for years, but after a while his reliable tenant moves out, and (lo and behold!) it is expensive to turn over the apartment and he has little control working from the other side of the world! The funky little non-recourse loan is going to re-set from 5% to 9% (Heaven forbid!) and he feels awfully hurt by the whole process!
First, I will hazard a guess that you were too young to have lost any money in the 2008 crash. You were probably in school, and everything you have ever known about investing is that you buy stuff and it goes up in value. You are in the medical profession, so you are smart. You think you're a bit more savvy than the average doctor even, in financial terms, because you found out about the magic(!) of self-driected IRA's and you have a leg up on everyone else.
Here are some lessons:
1. If you buy a product and you don't understand it, your risk is your own.
2. Not all investments make money. Sometimes you win and sometimes you lose. Concentrating your IRA in one goofy condo across the country is a very specific bet. Why didn't you simply buy mutual funds? Because you're smarter than the sheep who buy mutual funds?
3. Taking on debt in an IRA account is silly. If you don't have the reserve funds (in the IRA itself) to back up the investment, don't do it.
4. Plenty of people on Bigger Pockets are trying to sell the self-directed IRA/401K dream. It is a recipe for this kind of concentrated loss situation. DON'T MAKE INVESTMENTS IN PHYSICAL ASSETS WITH YOUR RETIREMENT FUNDS UNLESS IT IS MONEY YOU CAN AFFORD TO LOSE!!!!!!!!
5. This too will pass. Sell your asset if you have to. Take your loss and move on. No one sensible is going to have a tremendous amount of sympathy for a doctor in Hawaii who bought a condo on a lark. "HOW CAN THEY LIVE WITH THEMSELVES?" People brag here in the forums all the time about big spreads on wholesale deals and other shady practices. "I just found a willing buyer and a willing seller" You were the willing buyer here.
6. I welcome your indignant, "Why are you rubbing salt in the wound?"
Because you deserve the straight talk.
Because people who buy tricky real estate with tricky tax angles and are uninformed will have their money taken again and again. I am so glad this this example made with a young doctor in the prime of his career. How about taking some ownership for your part in this dubious transaction?
You didn't get "scammed" because your loan rate is going from 5% to 9%. You didn't have a plan for when that would happen.
I have lost money in deals. Anyone who had assets in 2008 lost money (and 2000 for that matter). People are getting freaked because the stock market is down a little bit. Big Flipping Deal. Risk is a real thing. You lost. Move on.
FANTASTIC PROFITS are never guaranteed, especially when you are putting your training-wheel IRA capital at risk in concentrated deals.
People have forgotten how to lose money. Accept it, Own it. Move on.
