Self directed IRA - Posted by Levi

Posted by michaela-CA on January 02, 2008 at 10:11:10:

Self directed IRA - Posted by Levi

Posted by Levi on January 02, 2008 at 09:47:30:

I opened a new self-directed ROTH IRA. What is the best way to get some real estate in there since there’s only $4,000 in it? Initially, I thought doing a low money down sub2 or contract purchase would be ideal, but then I learned that you can be taxed on the financed portion of the investment, which eliminates a lot of the benefit of having an IRA.

Pitfalls in low balance SDIRA - Posted by John Merchant

Posted by John Merchant on January 04, 2008 at 10:12:45:

I’d advise waiting until you have some real money in your IRA so you don’t get over-extended.

Think through what you’d do if you ran out of IRA money and had to make some kind of payments on the RE, or its expenses…how could you do this without some prohibited self-dealing?

One possibility is to maybe find some other REIs and form some kind of partnership with them where your little IRA would be just part of the funds and where your p’ship agreement clearly stated that under no circumstances could you be called on for further contributions.

Even on a little Lonnie Deal, in a MHP with your buying the cheapest little MH, there could be some costs such as MHP lot rent, utility payments, etc. so your little IRA would soon be outa money and in trouble.

Re: Self directed IRA - Posted by gerald(tx)

Posted by gerald(tx) on January 03, 2008 at 11:09:04:

Hi Levi!

With this small amount the way to use it is in a deal where you can structure it using an option instead of a traditional sale. Only your cash can be used to make your IRA grow, not borrowed funds.

Say there is $15k profit in a deal. You want to sell the option, not the property. If you use $3k for an option and sell that option to your end buyer, then you have made 500% profit. All this profit can be placed in your IRA. Keep repeating this kind of return and your IRA will make your rich.

I might add that you need an understanding administrator to help you make this work smoothly.