Posted by PaulNM on November 12, 2000 at 12:13:46:
Rule NO SELF DEALING. I realize the boundary between self and other can be blurred with corporations, trusts etc. but if it feels like you are dealing with yourself, you probably are, and shouldn’t be doing it.
Now some practical, as apposed to legal, considerations.
Compared to stocks, real estate is messy and your current IRA Trustee may not want to deal with it.
Examples: Title to the property has to be held by the Trustee. “Global Financial Services Corp. Trustee for the Benefit of John Quincy Doe” probably won’t fit in the county clerks computer so it will get “creatively” abbreviated. The tax notices get mailed to Global and some minimum wage clerk is suposed to figure out what account they go to. Good luck.
Many Trustees charge for each transaction. Not such a great deal if you buy a note with $50/month payments and there is a $15/transaction fee.
You are truely working through a third party. Think back to the last property your purchased and imagine trying to get the deal closed when all the papers have to be sent to that same overworked clerk, who has no idea what they are or how they should be handled. Additionally, s/he has to get them signed by someone more senior who may or may not know more than s/he does. It can really get “entertaining”.
On the other hand, it’s a great place for balloons. If you buy a discounted note with 30 year amortization and a ten year call the net present value of the balloon is very small. If you put the balloon in the IRA there are no monthly transactions, no notices to get lost etc. Especially if the note gets paid off early, the impressive increase in value is inside the IRA.