What to do with IRA-owned property?

Question

Hi folks,

I have property owned by my IRA and I'm trying to solicit some some insight to figure out what might be better use of fund.

My first stab at RE investing was due to my excitement of knowing that I could self-direct my IRA. So I converted to Roth (ouch!) and early last year purchased a house with the intention to flip it. Market was slow, but perhaps mostly about the location and/or rehab wasn't really done in flip 'standard'. So it sat on the market for several months and I finally decided to just rent it out. Now it has tenants. They seem to be the model tenants that landlords wish to have. On that end, it's not bad.

But I think I'd still want to get cash from it and will attempt to flip again; now it would be somewhere nearby. I thought about using non-recourse loan but the lenders I've approached would not loan <100K. And I'm a little hesitant as I would now have to deal with UBIT. Also I read at some posts, holding a rental in it might not be the best way to go.

Any suggestions/comments are appreciated. Thanks.

Ben A · Answer

Thanks Dennis. I'll see how it goes. Right now, tenants are great so keeping it works out fine for now.
I'll keep looking for non-recourse loan. BTW I don't have LLC as my custodian is ETC. So far tenants don't mind writing the long name on the check each month : )

Dennis Tierney · Answer

Ben:
I have multifamily investments in my SDIRA and would encourage you to keep at it. It has been a good source of cash flow into the IRA and I have been able to find nonrecourse loans, you just have to be persistent. A couple of the loans I have are with insurance companies that were found by a mortgage broker. They are more expensive with fees but will do nonrecourse. For me the UBIT isn't a big deal since the depreciation causes the LLC to have a "loss " anyway.

Arthur Garcia · Answer

Just my two cents - seller financing and carry the note at @8 % due in 2-5 years, or lease option it.

Ben A · Answer

Thanks Chris. Perhaps I'll keep with the current tenants for at least til the end of year, and figure out along the way what to do.

Chris Martin · Answer

Lots of us know what you are experiencing. One alternative is to sell with owner financing to another investor. See my post on July 24 '11 on this BP topic for what I had planned to do. Once you get the note, you could sell the note to a note broker. You may need to season the note. I know, not ideal... but it is one alternative.

Sidebar: I still have this property and may for a while. I'm not actively trying to sell it right now.

What to do with IRA-owned property?

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