Acquiring cash flowing properties through IRA

5 Replies

Learn the rules around what you can and cannot do. I use my SDIRA to invest in multis & self storage because jumping through the hoops to stay in compliance with single families would be too much hassle.

One thing to look out for is UBIT (Universal Business Income Tax)....Any Investment you make in your IRA that also has leverage attached to it will open you up to UBIT...this will be painful so should be avoided in most cases (unless the ROI is so good it justified incurring a tax inside a tax sheltered account).

This doesn't come into play if your IRA is lending money but only if you are buying ownership in a property. I prefer to use my IRA money for strictly lending purposes for this reason and I use my Solo401K (which can be structured to function as a REALLY BIG Roth account known as a Mega BackDoor Roth) with contribution limits of $56K per spouse per year to actually buy investments. The solo401K is not subject to UBIT even if leverage is used. Note this only applies if you have a business where you and your spouse are the only employees. Sorry for the tangent, just thought some might appreciate this complimentary strategy.

Originally posted by @Shaun Inniss :

I'm a new investor who just opened an self directed IRA. Any suggestions on the first steps to acquiring properties via my IRA?

First step is to learn the rules and become aware of the tax benefits you will no longer have inside an IRA. Everyone else can take depreciation but you, yet you have a dozen new hoops to jump through to avoid self-self-dealing and UBIT.

I'll lend or flip (maybe) inside an IRA but never hold. Fit the investment strategy to the method of owning not vice versa.