All Forum Posts by: Kaaren Hall

You can take 50% of your 401(k) value as a loan, with a cap of $50,000.  You must pay your 401(k) back in either monthly or quarterly payments over a 5-year period.  The rate needs to be a "market rate".  It's a good way to have the capital you need and some extra self-savings at the same time.  

Investing your Individual Retirement Account (IRA) in real estate presents lucrative opportunities, but it entails specific rules and considerations. Same with the Solo 401(k) for those who are self-employed. Happy to discuss your questions!!

Bryce- I am the CEO of uDirect IRA Services. I'm sorry to learn of the difficulty you have faced.

Our custodian is American Estate and Trust and not APS (American Pension Services).  APS went out of business years ago. 

A property has a value regardless of what is owed. If you have no mortgage the value would have been the same. It is not the value plus the mortgage. No property value is ever calculated that way.

The information for box 2b was taken directly from the 1099-R codes. If you buy a property for $100,000 and take a loan for $50,000, the value of the property is not $150,000 it is still worth $100,000. 

Your property's value was $154,900 at the time of acquisition.  You took on a loan of $100,685.  AET reflected correctly the value of the property, minus the non-recourse note.  The value is not the taxable amount minus the mortgage. The same would be true on your private home.

You provided an appraisal for $174,000.  That was the property's actual value and it is that value that was correctly reported to the IRS.

Kyler - If you wish to personally own a property your self-directed account owns, you need to withdraw the property from the IRA.  To do this, you would first obtain an appraisal.  Submit that appraisal to your custodian and request the non-cash withdrawal.  The custodian will re-title the asset to your personal name and you would then receive a 1099 for the appraised value of the home.

Sounds like you are already familiar with the homebuying process so that's a plus.  With a SDIRA, you need to keep in mind that you will pay all expenses (closing costs, earnest money, utility bills, rehab costs) from the IRA and NOT PERSONALLY.  Similarly, all proceeds return to the IRA. 

Because you are not allowed to do the physical work on the house, you may wish to bring on a property manager.  In this way, repairs and maintenance can be handled at arm's-length.  

Happy to disccuss further.  Contact information in my bio.  ~Kaaren

Holding real estate in a Self-Directed IRA has been allowed since 1975, so it's nothing new. A few things to consider:

* All expenses of the asset must be paid for by the IRA so leave a 10% pad in your account.

* Non-Recourse lending is available, but it can lead to a tax on your IRA called UDFI.

* All proceeds from the property must return to the IRA (not to you personally).

* The LLCs you have today are personal. If you wish to create a special-purpose, IRA-Owned LLC then your IRA can use this vehicle. You are "disallowed" to your IRA so the LLCs you personally own cannot be used in conjunction with your IRA.

Happy to talk with you to answer any other questions.

Before you start the project, talk with a non-recourse lender. I have a list of them if you would like it. Ask them about how their loan programs conform to your construction goals. Keep in mind all expenses of IRA-Owned assets must be paid for by the IRA. I would also discuss this with your tax advisor as well because proceeds from borrowed funds in an IRA will lead to UDFI tax. Not sure what that is? Go to www.IRS.gov Pub 598.

Before you invest in a syndication with your SDIRA, ask the asset sponsor if they are taking on debt.  It's the debt that can lead to UDFI tax.  If you can invest as a debt partner vs. an equity partner then you can avoid UDFI. In other words, your IRA makes a loan to the syndication vs. becoming a subscriber.

Bill is right.  It works like this: Starting in 2024, you can roll unused 529 assets—up to a lifetime limit of $35,000—into the account beneficiary's Roth IRA, without incurring the usual 10% penalty for non-qualified withdrawals or generating any taxable income.  

You can use non-recourse debt to purchase a property, keeping in mind your IRA will pay UDFI tax on the proceeds earned due to debt. 

Instead, you can co-invest with a partner and share the expenses and profits without the UDFI tax.

Ask your custodian if they will accept the FMV.  Because the conversion is taxable and will be reported to the IRS, a third-party valuation may be needed.  Your custodian can give you their criteria.  I doubt this conversion would trigger an audit, but if you truly are concerned about it, please discuss with your tax advisor.