Self-Directed IRA Real Estate FAQs

FAQss

I don’t have enough money in my SDIRA yet to pay for an investment on my own, what are my options?
This is a very common roadblock that a lot of investors have, but it also comes with simple solutions. One solution is to pool your resources with another investor, or private lender, to come up with the funds necessary to purchase the property in question. If you invest 50% of the funds in the property, your IRA is then owns 50% of the title, and is subsequently responsible for 50% of the costs to maintain the property, pay taxes, and whatever costs are associated with the property.
Aside from private lenders, there are other seller carrybacks like mortgage companies that may also lend to your IRA to purchase property.

What is checkbook control, and is it necessary to purchase real estate?
You absolutely do not need an IRA LLC (or as it’s referred to here, as checkbook control) when you’re looking to invest in real estate, but it’s definitely helpful. Pairing your self-directed IRA with checkbook control allows you to pay for services associated with your property quickly, and easily. You’re essentially cutting out the middleman and the paperwork that you would normally have to deal with without checkbook control.

Am I limited to only buying single family homes?
You actually have a great deal of options in types of real estate you’re allowed to invest in. Since your IRA is a self-directed IRA, your options are sort of unlimited as far as real estate. Here are just a few:

  • Apartments
  • Commercial property
  • Duplexes
  • Condominiums or townhomes
  • Single family, or multiple family homes
  • Tax liens certificates
  • Tax deeds

So what would the caveats of investing with an IRA be?
There are a few laws and rules that the IRS has put into place that an investor needs familiarize themselves with before any decisions or moves are made. There are prohibited transactions, and disqualified persons in all self-directed IRA real estate accounts that all investors have to follow.

Prohibited transactions include any direct, or indirect selling, exchanging, or leasing of any property between an IRA and a disqualified person, and a disqualified person would be:

  • The IRA owner
  • The IRA owner’s spouse
  • Lineal descendents
  • Spouses of lineal descendents
  • Investment advisors
  • Fiduciaries
  • Any business entity (LLC, Corporation, Partnership, Trust) in which any of the disqualified persons previously mentioned has a 50% or greater investment in.

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