All Forum Posts by: Jim Kittridge

I should have clarified more. I was referring to financed rentals within a SDIRA. 

@Peter Thielemann You can absolutely do it through an IRA LLC but it isn't required. I would recommend speaking with one of the larger IRA custodians, Quest Trust Co or American IRA. They can help further educate you on what would be the best route. I would be happy to make an intro to American if it's helpful.

You can buy rentals inside a self-directed IRA but it isn't tax efficient and it's difficult to use leverage. Roughly 50% of the benefit most investors see from rentals are the tax benefits and amortization from using leverage. 

Rentals are a great way to build wealth but I would consider using your SDIRA with other opportunities that are more passive and aren't tax efficient on their own such as private lending, crowdfunding, or investing ETFs.

Flipping inside your SDIRA will definitely be categorized as an active business and should be treated as a taxable event. I have spoken to a few CPA's who are of the understanding that even having rentals with professional management is still considered active within a SDIRA.

I would recommend using your funds for less tax efficient opportunities like funding other people's flips, crowdfunding, or equities.

Great advice from everyone in this thread. Congrats for putting yourself in a strong position @Elisa Rafol. 

As others mentioned, if you want to be more passive, I'd recommend private lending. You'll typically get a 9-13% return with experienced borrowers and proper protections in place. If you go this route, it's critical to perform proper due diligence on the borrower, the property and ensure you have equitable collateral. 

If you want to be more active, you can look at purchasing rentals or small multifamily. Your cash on cash return will likely be lower, but there are other advantages to owning real estate directly such as depreciation, amortization, and appreciation. 

In the current environment, I would steer away from office or industrial.

@Toby Jurging I would recommend not doing buy and holds inside of a SDIRA. In my opinion, you're better of using SDIRA funds to for opportunities that aren't very tax efficient like short-term private lending.

There are a lot of benefits of doing buy and holds, but most of them won't be realized inside as an SDIRA such as the tax deduction and amortization.

Sorry to hear that you had a bad experience @Mario Rosales. I would check your OA and the promissory note to see if you have any rights to recoup funds. 

Next time, I would recommend having your funds be put in 2nd position or at a minimum, get a personal guarantee agreement from the borrower until you have a proven track record with him/her.

What market is a PM taking 25%? That is super high unless it's for vacation rental or STR.

I’d talk to some other rental investors there. 

That is not normal. Who is your lender?

Your understanding is correct if that’s the route you want to go. Find one that you can buy under market or add value to so you can refinance and get cash out later. 

 Happy to help. Best of luck.