Question about Self Directed IRA purchase

3 Replies

So I just set up a self directed IRA account and have visions of someday purchasing a rental property for cash flow, which would be purchased by my IRA, what I want to know is, say I want to live in the property once its paid for by the renter, how am I able to take the property out of my IRA so I wont be prohibited by my IRA?

Thanks 

Kao

The property will never be "paid for" by the renter. If the title is in the name of the SDIRA, the SDIRA will hold an equity position in the property, not a debt position. So, any payments made by the renter will be revenue to your IRA, not principal pay-down. The SDIRA will continue to own the property until you sell it on behalf of the SDIRA. Selling the property (transferring title) is the only way to get the property out of your SDIRA.

The IRA (and anything in it) will not be able to benefit you personally in any way until you reach retirement age. In other words, you will not legally be allowed to live in the property until that age, at which point I believe you can take it from the SDIRA as a distribution.

Kauhu, if your IRA buys rental property - you are prohibited from doing any work on the property and receiving any benefits from it (i.e. living in it). The only way you can do it is after you reach you retirement age you can take entire property out as a distribution from your IRA. At that time you will have to appraise the property to find out what is the market value of it and then you will get 1099-R on the distribution amount. In order words you will be taxed on it. Unless of course it is in a Roth IRA.

Medium logo 19 1Dmitriy Fomichenko, Sense Financial | [email protected] | (949) 228‑9393 | https://www.sensefinancial.com/free-consultation/ | CA Agent # 01876563

Okay, understood, thanks for the responses 

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