Using Self-Directed IRA for REI (Equity Trust) - Posted by Will
Posted by Will on March 15, 2006 at 14:05:06:
I’m just wondering if anybody can tell me about their experience in using a self-directed IRA to purchase real estate.
The company I’m most familiar with in this arena is Equity Trust (www.trustetc.com).
Does this type of arrangement only make sense when one has enough money to buy a property outright? What about buying a rehab project? It seems difficult to fund the rehab through that self-directed IRA, but illegal to do otherwise.
If one is NOT buying a property outright, I know they make it possible for the IRA to purchase a percentage of a property. But apparently there are tax consequences to having the IRA take out a loan, correct?
Let’s say I have $50K in my IRA and I want to buy a $100K house to use as a rental. I can NOT buy the house for $100K in the name of the IRA, use $10K for a downpayment from the IRA, and then hold the mortgage in the name of the IRA, right?
But I could title the property 50% to the IRA and 50% to me. I could use the $50K from the IRA to purchase 50%. Let’s say I charge $800 per month for rent. Do I have to send $400 per month to the custodian of the IRA? Let’s say I get a 20 year note and my payment is $475. Can I call the other $325 per month profit and then just give my IRA 50% of the proceeds after I sell?
I have several rental units right now and I’m looking to increase my portfolio. However, I am trying to conserve cash. I’d love to have access to funds from my IRA to use for REI, but it seems overly complicated if you can’t buy outright.