All Forum Posts by: Loren Whitney

Hey everyone, 

I missed the July meeting but I'll try and attend the August event. Did many attend the July meet up? 

I live in Louisville right now but I'll be relocating to Erie in the fall. 

Looking forward to meeting you all. 

Not to throw Frank under the bus but his statement above isn't accurate. You cannot borrow against your IRA. However, you can roll funds from IRA to IRA once every twelve months using a 60-day rule. New IRS rules in 2015 state that you can only do this once across all IRA accounts.

@Sean Connolly

If it's a traditional IRA, it's not just a 10% penalty. You must also claim $75,000 of ordinary income on top of anything else you already earn. Assuming a 25% tax bracket for example purposes, you'd be looking at a total of 35% or $26,250 in taxes.

A self directed IRA can purchase real estate directly but there are certain rules that apply. Search the BP forum or check out my BP blog where I discuss real estate investments in an IRA.

Best of luck!

Welcome to BP @Jason Smith

Your IRA (old 401k) can purchase real estate and acquire a mortgage. This is a very common subject here on BP and has been discussed in depth.

I've also written a handful of detailed blogs on the subject in my own BP blog. Here's an internal link: http://www.biggerpockets.com/blogs/5105-self-direc...

Cheers!

Welcome @Brian Jurvelin

I agree with Travis (good to see you on BP Travis) regarding the amount of necessary capital needed to gain traction with an SDIRA - especially in real estate. Most investors will use their existing retirement assets by funding their SDIRA with a transfer or rollover.

If you're looking to purchase a property as a long term hold, you'll need enough to cover your down payment and closing costs (or cash purchase), plus any reserve requirements that your lender adds into the equation at a minimum. If you don't purchase a turn-key property, you'll likely find some repairs and/or improvements that need to made. Your IRA (as owner) will be responsible for covering all those costs which require additional capital beyond the minimums. SDIRA investors will commonly plan and strategize for all expected and unexpected events to determine their cash balance requirements. As you can see, the need for capital extends far beyond the basic acquisition costs.

Good luck getting started! You’ll find lots of great support here at Great Pockets. There are many SDIRA and Solo(k) investors.

@Daniel Dietz

You can see my BP blog post on the Top 7 Benefits of a Solo (k) here:

http://www.biggerpockets.com/blogs/5105/blog_posts...

You can techinically do an in-kind transfer of existing IRA assets into a Solo(k) after the acquisitions have been made but there are several important considerations. First, if the funds have a Roth status, an in-kind transfer may be difficult to impossible. Feel free to research deeded IRAs and see if that application fits your needs. Second, consider what the retitling process will details when shifting assets from the IRA to your Solo(k). Will you already have a mortgage? Will that cause any issues with your lender? Will you need to refinance as a result of title changes? Think about all of these things before you put the initial stucture in place.

As always, be sure to consult with your legal counsel before entering into any type of investment structure.

Nice work on this deal. Looks like you're well on your way.

Jean,

The note itself is not prohibited as long as the borrower is a non-disqualified person. The indirect benefit that you receive by involving your personal assets in the transaction is prohibited.

Does anyone mind clarifying the prorated calculation for this formula? From what I've gathered, it makes a difference if you begin using the property as a primary residence as opposed to buying a rental and occupying it after the fact to take the exclusion. 

I'm still having trouble determining my situation. I purchase a primary residence on 1/1/13 and begin renting it two full years later on 1/1/15. If I sell the property within three years, do I need to prorate gains or not? What about the opposite?

Technically an LLC is not required to make the investment. An SDIRA can invest directly and take equity in a J/V. You'll have to speak with your attorney regarding the pros/cons.

If your SDIRA is being used for a portion of the downpayment, the loan will most likely need to be non-recourse. You personally cannot guarantee a loan the IRA is involved in.

Iif you're investing as a limited partner and the gerneral partner is personally guaranteeing the entire loan, then normal financing is acceptable.

Remember that you as the IRA holder cannot provide goods or services to the plan (direct or indirect). If you're providing services for the J/V, that could create trouble for you. Be sure to review this in detail with your attorney.