All Forum Posts by: Roger StPierre

John,

To be clear, I am not a self directed IRA provider, but a non recourse lender who has a decade of experience in this area. From my perspective:

1. Your father's SDIRA could hire a contractor (unrelated person, not a disqualified party) to build a pole barn on that raw land, as long as he or you did not use your own labor or materials for that. All must be purchased by the IRA.

2. Conceivably his IRA could then divide and sell the smaller parcels as long as all the proceeds were put back into the
SDIRA, and none of the sales were to Disqualified Persons. 

3. Flipping real estate is possible but you must check the rules, as if it is a continual business, and not a once a year deal, there may be UBIT taxes potentially on the profits of such a venture.  

Chris,

Why don't you just set up a Self Directed IRA or Solo 401K Trust (if that type of entity is permissible). Then transfer or rollover the existing IRA or 401K funds into that new Self Directed Retirement entity/account. Then when that hot deal comes along, just pay cash from the SDIRA. If you want, you can later leverage that home or rental asset in the retirement account with a non recourse loan and put that money back into the self directed retirement account so that there are now more funds for future investments. There are several providers of self directed retirement accounts that frequent Bigger Pockets, or do your research and find the best fit for your plan.

Hey Matt. It isn't rocket science. Just be concise and tell the lender what the loan request is all about, the amount you want to borrow, your strategy for the property, and your experience, if any with investment/rental properties. Don't worry too much about it. There aren't any wrong answers!

You might try Matt Sorenson of KKOS Lawyers. Google him in Scottsdale/Phoenix. I have known Matt for a decade and he is one of the Best!

You might look further into the idea of leveraging your 401K Funds with a Non Recourse Loan. That way you would avoid the rules of self dealing and disqualified parties co-mingling funds. The interest rates on non recourse loans are competitive and would allow you to fully use your 401K funds, along with a non recourse loan to purchase a property costing more than just what you have in your 401K account. Most lenders will lend 50-60% of purchase price.

John, UBIT only comes into play on self directed IRA's, Not on Solo K's (Solo 401(k)s). Sorry to confuse the 2 kinds of accounts. I guess I shouldn't have mixed the 2 types in this one blog post on 401(k)s.

We finance rentals for investors using their self directed IRA's and 401(k)s. And yes, you can take all the normal deductions of real estate when you file your 990-T Tax Returns. Lock in those losses annually and then when you go to sell, you have offsets for any potential capital gains and UBIT taxes. Financing or refinancing and taking cash-out of a free and clear rental is a great way to increase your rate of return.