Updated about 3 years ago on . Most recent reply
LLC Purchase with IRA funds.
My wife and I are using some IRA money to invest in real estate. We will set up an LLC when we create the new IRA and run our Real Estate into that. I reached out to my mortgage guy to run our plan through him and he came up with some issues. Apparently, there is an issue with financing property through an LLC. He said it would need to be put into a trust or our names for 90 days and then we could roll it into the trust. This brought up some questions/concerns-
1. The LLC protects us from our personal assests. I do not like the idea of being personally liable for anything that happens for 90 days. Is there anyway around this?
2. He said the down payment could come from our newly formed business account. He said that should not be an issue. I think we are ok here but wanted to see if anybody here had any different thoughts on this.
Currently, our only option would be to pay for the property in full. Then it could go directly in the LLC. We could do this. I really do not like this option though as it would limit our ability to add properties in the future.
Thanks for any and all feedback.
Most Popular Reply
!!! STOP !!!
You are heading down the wrong path and could potentially void the tax-sheltered status of your IRA. Speak with your IRA plan provider, your CPA, or a tax attorney before you proceed.
A self-directed IRA is not a means for you to access cash for real estate investments you want to make. Rather, such vehicles are a way that your IRA can be diversified and hold assets such as real estate instead of being limited to investing in the stock market.
To retain the tax-sheltered status of the IRA, yYou may not create any direct or indirect transactions or provision of benefit between the plan and yourself.
An IRA can borrow, but the loan needs to be non-recourse, meaning no personal guarantee from you. As a disqualified person to your IRA, you cannot pledge your assets as security for the IRA's debt. Clearly both you and the lender you are working with are not aware of this restriction.
You absolutely cannot purchase a property in your own name and then transfer that to the IRA or IRA owned LLC.