All Forum Posts by: Jared Lopez

It is fine to receive private money from an individuals self-directed retirement plan and taking multiple investors is fine as well. There are certain rules and restrictions you should be aware of.

While I can't provide investment advice, if you give me a call or PM me, we can discuss the IRS rules.

Kevin,

I am not a banking expert, however it is my understanding that a standard checking account is associated with 2 forms of lines of credit. One for overdraft allowance and the other for early availability of un-cleared funds. Both of these are tied to your social security number, which means you are providing a personal guarantee for these lines of credit. In addition, if the account bears interest your SSN is tied to the interest gains.

As far as the single member LLC, those bank accounts and lines of credit are typically non-recourse, which allows your IRA LLC to be offered these lines of credit.

It is my opinion that you should seek the advice of an ERISA specialist to preserve your IRAs tax advantaged status and the integrity of your retirement wealth.

Hello Kevin,

First, ET is correct in that you can not be reimbursed. The goods you purchased can not be used on an IRA held property unless the IRA purchased them.

Moving on, do the checks you have at Wells Fargo state the IRA name or your own personal name? From the information you provided, the area of concern for me is centered around Wells Fargo setting up a checking account in your own personal name and you place your IRA funds in that account.

I hope you can clarify.

-Jared Lopez

You will need someone (administrator, custodian, or other qualified individual) to do the asset reporting for the IRA. It's very important you feel comfortable with the firm you are working with. Some places make you feel like you are in the Wild Wild West and others will take the time to assist you with everything you need.

There are several banks out there that do non-recourse loans to retirement plans. They would specially analyze the deal and set loan terms based on the specific investment. Because you can not personally guarantee the loan, the rates tend to be a little higher.

Full disclosure, I work for a self-directed retirement plan administrator. As Doreen mentioned, it is important to look over a number of custodians to see where you are most comfortable and who will be able to assist you with your questions. While we do not set up the single member LLC for you, we do allow this provided you work with an ERISA attorney to set up the LLC correctly.

This does a number of things for the client. For one, the price usually turns out cheaper than using the administrator which sets up the LLC for you. You also get the expertise of an ERISA attorney to rest assured that what you are doing is allowable in a retirement plan and you can pick their brains for what you need to do going forward. I don't want to sound "salesy," I am just letting you know your different options.

The article you posted doesn't claim you can't invest in real estate using an IRA. From your description, it seems as if you are looking to loan money to a real estate investor. Either option is allowable. You can own a property in an IRA or you can lend money out of your IRA to a real estate investor.

This article states some negatives include not being able to use the property personally and custodial fees. If your IRA funds are in the stock market, you wouldn't be able to use the funds personally, the same would apply for real estate. The investment would need to be just that... An investment! Yes, there are administrative fees for this - but you are tapping into funds you normally wouldn't have access to.

He also point out that there are taxes based on the investment. Anything you pull out of an IRA is taxable income upon distribution, unless it is in a Roth account. The bottom line is if you are knowledgeable in real estate and think you can receive a higher return in purchasing investment properties as opposed to stocks, bonds, mutual funds, and CD's - why not use your IRA funds to invest in real estate?

Your IRA can take a loan out from any non-disqualified person or entity, however It would NEED to be a non-recourse loan. You and your partners can not personally guarantee it.

Sorry about the confusion. Amanda could see if a non-disqualified person has money in an IRA/Old 401k that they would be willing to loan to her. It's just one option.

My second post was answering Tom's question.

Tom,

You are correct in the scenario you gave. You cannot use your SD IRA as a down payment and receive a loan to you personally from the bank. Typical bank loans are "recourse" loans. If you don't pay the loan back - the bank will go after you, your money, and your assets. If you are looking to invest in real estate using your self-directed IRA, your IRA can receive a non-recourse loan from a bank. The bank actually analyzes the specific deal you are looking to invest in, and loans to you based on the deal. If something went wrong with the property and you weren't able to pay the loan back, they can only go after what is in the retirement plan - not you personally. It's actually very interesting. Most banks will not do this, but there are a few niche banks out there. And when you own the property with your IRA, you won't be able to take any of the funds personally, it is all for benefit of the retirement plan.

An option is to partner your IRA funds with your own personal funds, but that gets a little tricky and we would need a call to discuss the specifics.