All Forum Posts by: John Akolt

Yes, usually you set up an llc entirely owned by your self directed ira.  That llc joins as a member of the llc with the other 3rd party members.  You can manage your llc but you can't participate in it--no painting, remodeling, etc.  The penalties for screwing it up are severe.  If it is a grey area pay someone (through the llc) to do it and avoid the stress.  Ask an attorney/cpa until you have some experience with the boundaries.  

No, it would be a prohibited transaction--

Internal Revenue Code Sections 408 & 4975

Property expenses and depreciation can be used against the rental income.  (depreciation is spread over 27.5 years if residential property)  If there are losses then it will not reduce your other income unless you make less than $150,00.  Look up passive income rules, if interested

That's why banks do appraisals.  

No, upon death there is a step up in basis.  

I wouldn't make that payment.  Even if he is honest, what is the incentive to finish on time?  If you really want to use him.  Pay for the materials directly and then for the difference when completed.  Or use a credit card with a set completion date.  

Does your employer match contributions?  That is free money.  Usually tax deferred money is the way to go. It can also be good to diversify too--real estate and stocks have low correlations.  Look at the employer's plan.  There are often ways to pull out funds via loan or hardship.

You said that you have negative income due to self employment. You may want to consider converting your IRA to a self directed Roth with checkbook control. Fix up the properties and after a few years you will be able to withdraw conversions (not appreciation) to Roth without any penalty. Any appreciation from the Roth is tax free too.

If you are interested in flipping homes in the chicago area I would be happy to discuss

I usually make a few steps 1. by agreement of the members (majority, 75% or all) and former partner 2. if no agreement then hire an appraiser mutually agreed upon to establish value 3. if no agreement then hire two appraisers to reach agreement or take average of their #s.  4. no agreement- the appraisers hire a 3rd appraiser whose valuation is final.  require the appraisers to be certified with x years of experience. FYI--the income approach to value is the primary method of valuing commercial property.  A relevant consideration when you have a property leased to another closely held entity. Might want to require appraisals to be based on market approach.