Self directed IRA can Get a Loan? - Posted by Taxing Question

Posted by Wheatie on April 08, 2008 at 24:31:20:

Is this a Roth IRA or a regular IRA? Its my understanding that UBIT rules are different for a Roth than a regular account. As in, you don’t pay UBIT in a Roth while you do in a regular one. Much more attractive for this type of investment.

If its a regular account, I don’t see how you can get the gains into a Roth without doing a conversion and paying the taxes up front.

As another poster mentioned, high down payments are common. 30-35% from my discussions with several lenders. And you must have all the money to operate the property in the IRA. You can’t just add more money if you run short. $20K is too little.

Self directed IRA can Get a Loan? - Posted by Taxing Question

Posted by Taxing Question on April 05, 2008 at 21:55:45:

Can I get a loan for my Self directed IRA to buy a house Is this True.

Have 20K in the IRA would like to buy a 100,000 Rent house.

Can I get a Loan in my IRA’s Name is that really possible

Way to really profit your IRA - Posted by John Merchant

Posted by John Merchant on April 16, 2008 at 12:18:42:

As has been commented on lots of times, an IRA can really benefit in a big way if it’s buying an option for a few bucks, or else it enters into an agreement to take part of the profit on a deal when it’s sold…and doing this, with the IRA’s owner putting the deal together, the return to the IRA might be infinitismal, in that the IRA might have ZERO money into it.

Re: Self directed IRA can Get a Loan? - Posted by AlexCO

Posted by AlexCO on April 09, 2008 at 16:31:53:

Did exactly that in April, 2007.
Bought a rental SFH using my Roth IRA and my wife’s with a non-recourse loan.

Required a 30% downpayment and 6-month reserve in Roth IRAs.

Don’t know if the requirements became more strict after the subprime fiasco.

Yes, more than one IRA account can be combined to purchase a single investment property and obtain a loan for it, if a single IRA account can not satisfy the requirements (downpayment and 6-month reserve). We did it.
(The two or more IRA accounts to combine do not have to be those of spouse or relatives.)

As for UBIT, it is my understanding that the entire profit should be proportionally divided into the one derived from your own Roth IRA original fund at the beginning of the year, and the one derived from the amount (principal) of the loan at the beginning of the year, and only the latter is taxable.
I will know better when I file my first tax return on behalf of my IRA this year. (The IRA account need to obtain a FEIN=Federal Employer Identification Number, BTW.)

As my IRA account pays down the loan, the UBIT taxable income will be reduced every year, and will eventually be zero. The after-tax profit derived from the loan can remain in IRA.

As I see it, even with UBIT, my IRA should grow faster with the loan than without a loan, and is still benefitial.

Re: Self directed IRA can Get a Loan? - Posted by Paul

Posted by Paul on April 06, 2008 at 09:35:57:

Why use your IRA money? Is the investment really good, why not consider a couple of investors, you put the deal together and get the acquisition fee % of cash flow and % of equity.

What are you looking to invest in? What’s your exit?

Yes, but… - Posted by Penny

Posted by Penny on April 06, 2008 at 08:24:20:

There is a lot of info in the archives about retirement plan investing - here is a Cliff’s notes version. As always, consult a qualified CPA or tax attorney who can guide you for your specific situation.

An IRA can obtain a loan to purchase investment property.

However, you cannot personally guarantee the loan for your IRA. That means the loan will be nonrecourse. As such, lenders will typically want to see 30% down or more. Hopefully, others on this forum can chime in with what they are seeing today.

Your IRA also needs to cover closing costs and all operating costs not covered by the income generated from the rental property. If you have a vacancy, your IRA needs to be making the mortgage payments and covering other expenses. Make sure you have sufficient reserves within the IRA.

Taxes are interesting in this case. Profits generated as a result of the leverage are subject to UBIT taxes paid by your IRA, which are at the higher trust rates. Consult a CPA to go over this with you.

The usual prohibited transactions/disqualified persons rules apply for IRA investing.

Hope this helps.

Re: Way to really profit your IRA - Posted by saadia

Posted by saadia on April 30, 2008 at 21:54:11:

Dear. john my name is saadia i am new real esate investor who need a financing discussion safe and sacure in asiouxfalls sd 57110 thanks

Because the profit after UBIT - Posted by Taxing Question

Posted by Taxing Question on April 06, 2008 at 23:28:36:

will go into my ROTH and then I can use the after tax gains of the Property grow a larger and larger amount of cash that will eventually grow tax free and be withdrawn tax free!