IRA as down payment for investment condo

4 Replies

Hi all,I 

Good afternoon. I love the board. I've been reading through the posts and have learned quite a bit.

I am in the mortgage industry and know general guidelines. I'm looking to try and figure out ways if using my IRA as a down payment for a rental? I do realize investment properties need 20% down. I have that 20% down available to me in an IRA that was a previous 401K from a previous company.

My goal is to purchase a $200K investment condo on the beach where most of the units are investment properties.  I have three questions. 

First, what kind of options do I have to take that 50K from the IRA and use towards the 20% down to purchase a condo? I say 20% because I am familiar with the conventional down payment of 20%.

Second, with these investment condos, how can I get an good idea on what the cash flow is? Will sellers ever provide tax returns or will the property management company provide rent-rolls and how do I know that they are accurate? 

Third, what are the rates and terms (DTI, downpayment) for hard or private lenders these days? I have 820+ credit. In my business we always looking at DTI, so is this something that private or hard lenders do?

Thank you,


@Kevin Parnella

If your intention is to buy the unit in your own name there is no option of using the IRA funds without paying taxes and penalties on early distribution.

If you are considering this purchase inside of your IRA, then you will need about 40% down. You would not be able to use conventional financing - it's not allowed with an IRA, you will need non-recourse loan (hence higher down payment). There is only a handful of banks specializing in this type of financing and most will require at least 30% down plus 10% of the purchase price in reserves. The fact that it is vacation rental and a condo will likely require higher down payment. So unless you find some private lender with more relaxed guidelines it doesn't look to me that your numbers will work out for this particular deal.

Regarding your other question about the cash flow - that is part of your due diligence, you might be able to get some rent rolls but I don't think anyone will provide you with the copy of the tax returns. But regardless you can't just rely on the report and have to do some digging to verify those numbers. 

@Kevin Parnella

The IRA rules do not allow for loans but the solo 401k rules do. To learn more about the 401k loan rules. See the following link.

Question. Could he rollover his IRA to a self directed IRA? Have the SDIRA invest in a LLC he creates and then have the LLC $ as a downpayment?

@Gary Bennington

the IRA owned LLC would be subject to the same rules as IRA and that would apply to financing as well. With this structure you would not be able to use conventional financing.

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