Professional · Portsmouth, NH · Member since 2014 · 175 posts · 108 votes
10y
The RE that is purchased must be for the strict purpose of growing the IRA. It' can't be a property you or any disqualified parties ( your spouse, parents, children) already own, have ever owned, live in or plan to live in. The down payment comes from the IRA, as does final purchase cost. You can combine your personal money with your IRA $, or funds from other investors, and you'd each have a percentage ownership as tenants-in-common.
Any expenses related to the IRA-owned property must be paid by the IRA, proportional to its ownership. The same holds true for income generated by the property. The IRA owner is prohibited from making any repairs or doing any maintenance work on the property - that is considered sweat equity, an illegal contribution to your IRA. Outside vendors need to be hired to do these kinds of things (mow the lawn, paint, make repairs, etc).
Professional · Portsmouth, NH · Member since 2014 · 175 posts · 108 votes
10y
The RE that is purchased must be for the strict purpose of growing the IRA. It' can't be a property you or any disqualified parties ( your spouse, parents, children) already own, have ever owned, live in or plan to live in. The down payment comes from the IRA, as does final purchase cost. You can combine your personal money with your IRA $, or funds from other investors, and you'd each have a percentage ownership as tenants-in-common.
Any expenses related to the IRA-owned property must be paid by the IRA, proportional to its ownership. The same holds true for income generated by the property. The IRA owner is prohibited from making any repairs or doing any maintenance work on the property - that is considered sweat equity, an illegal contribution to your IRA. Outside vendors need to be hired to do these kinds of things (mow the lawn, paint, make repairs, etc).
First, I see that you are brand new, welcome to BP family!
Doreen covered the basics for you, but in addition you can search the BP forum for related discussions. This topic comes up often and there are many discussions that will keep you busy reading for hours...
Arlington, TX · Member since 2015 · 2 posts · 0 votes
10y
Thanks. I was not aware that all repairs or 'touches' to the property had to be through a 3rd party. It makes sense, but also complicates it and drives up cost to some extent.
Do you have guidance on setting up a self-managed IRA to purchase real estate for rental investments?
Hello and welcome. My age is 59 years old and have grew up in Dallas, Texas. I have learned a little bit about self managed IRAQccount and I am hearing that it's OK to infect that money into real estate as long as you don't personally profit from it. I have been in the construction business since I was 17. I graduated college at North Texas State and got my broker license in 1980. If you think I know that I can help you in any way please do not hesitate to contact me. I am still learning to be an investor from bigger pockets that I found about 2 months ago. Good luck! I am getting ready to open up a true self directed IRA. Bye.
Allen, TX · Member since 2014 · 74 posts · 22 votes
10y
@Michael Lee do you have the money you want to commit to real estate in a "Self-Directed IRA"? That's going to be your first step. There are many out there that when you fund your SDIRA they will provide you many educational resources and a representative that can help you understand the details. They will work with you to make sure you do not make any unauthorized transactions. The education they provide will help you know what you can and can't do. Did you know something as simple as going to your investment property and changing a light bulb is prohibited and can put your entire SDIRA at risk triggering taxes and penalties that would cost you 40% or more?? This is why it's very important to have good education before jumping in. My SDIRA custodian is Equity Trust and they provide very good education resources. Good luck!
Welcome to Bigger Pockets. This is a great community as you can see from some of the great responses you've received already. As Dmitriy pointed out there is a lot of existing info on self directed IRAs you can search for. You can also set up keyword alerts for these topics to stay on top of new discussions involving what interests you the most.
Investor · Coppell, TX · Member since 2008 · 2k+ posts · 646 votes
10y
Hello! Yes, I do have some money to get started. I have talked to a rep at Trust Equity. I am sorry that it took me so long to get back with you but I just found this letter last night. I hope to hear from you in the future for anything. Best wishes!