All Forum Posts by: Dmitriy Fomichenko

Another suggesting is to find local community lenders, you might have better luck with them.

@Frank Fiore Jr

lots of good suggestions/answers already... I agree with @Jeff Barnes that Solo 401k would be much better solution - no custodian or LLC, but you gain additional advantages such as higher contribution limits and more.

Let's define Disqualified Persons – this means you, as the account owner, your spouse, your parents, grandparents or other ancestors, as well as your children, grandchildren, or other descendants, as well as the spouses of any of these persons. So, for example, your step-child would not be a Disqualified Person, as long as you haven't adopted the child. In addition, your siblings aren't Disqualified Persons either, nor would “significant other”. So technically, one of these people could transact business with your Solo 401k - as long as there is no other reason to prohibit the transaction.

The problem is, if you (or another Disqualified Person) benefit directly or indirectly from a transaction with the Solo 401k, the transaction is prohibited – no matter who the person is that you’ve transacted with.

@Joanne Courville

You been already given some good suggestions above, let me just add my 2 cents. I think you have a lot of variables here, and that is too complicated for your first deal in your IRA. I suggest you make your first deal really simple. As you learn and gain more expertise using self directed IRA for real estate investing, then you may move on to little more complex deals.

Regarding not having checkbook control. While it is correct that by having a checkbook control will give you more freedom and control, being under the custodian does not remove the responsibility from you, the client and the investor. I've read client agreements from at least dozen of different self directed IRA custodians (including all mentioned above), and all of them have a disclaimer that they are not responsible for you getting involved in a prohibited transaction. So the conclusion is that investing using custodian self directed IRA will not be as convenient as having a checkbook control, that does not protect you or take a liability off of you should you get involved in a prohibited transaction. The bottom line is that you need to know what you are doing regardless which investment vehicle you choose.

I also suggest you learn about Self Directed 401k. Here is an article that will give you some basic understanding: http://goo.gl/TxmFNT. In most cases 401k will be much better option comparing to self directed IRA. There are several major reasons such as lower cost to maintain the account, more flexibility, tax free investing with Roth Solo 401k sub-account, ability to access your retirement funds up to $50,000 at any time tax free and penalty free in form of a participant loan, exempt from UDFI tax on leveraged real estate and more.

Wishing you the best, Joanne!

@Ellis San Jose

great point in #6! I love tax deferred or tax free note investing with self directed IRA or 401k.

@Daniel Dietz thanks for your comments, good points!

The lending could be difficult depending on the property type and condition. However, if you are buying decent single family dwelling, getting a loan is quite simple. You don't have to qualify for it, the property does. Note that the loan has to be non-recourse. Here is the list of lenders that would do this kind of loans: http://www.sensefinancial.com/non-recourse-lenders/

Of course, before doing anything, make sure that you understand what you are doing and seek some help from professionals.

@Pam R. I think there is some wisdom in your suggestion, thank you!

@Chris Martin that is what I been doing so far, letting it go...

But I hope that by brainstorming it with the BP community we can come up with some solution or idea that would be beneficial not only to me, but to other landlords and investors.

@Lynn McGeein thank you for your suggestion! See, these people don't have a bank account. They use pre-paid cards. They use cash to load and re-load them. I don't think them going to the city to pay is the issue. They are actually able to make the payment online using one of their pre-paid cards. I think it's just poor budgeting and bad habits and maybe not having strong enough desire to change things for better... Yes, there are people like that who use pre-paid phones and pre-loaded cards... I don't get it, but it seems that some people are just living in a different worlds than some of us...

@Nate Crump

thanks for providing more info, that helps. In this case, Solo 401k would not work for him (he would not qualify since he has full time employees). His answer would be self directed IRA. It works just like conventional Traditional IRA, but investment choices would not be limited to the stock market (like conventional account). There is a way for him to use the funds to invest in real estate. Unfortunatelly I'm unable to be more specific because I don't know his situation, but like I said, there is plenty of educational info out there that he can learn.