Self-directed IRA for BRRRR question with example

[Mitch Black]

If I use a self-directed IRA to purchase a property for a BRRRR, can I refi the property using a conventional loan and pay the IRA back?

Example:

1. I Buy full-cash for property X using 60K from my self-directed IRA.
2. I Rehab property X using 25K from my self-directed IRA.
3. I Rent property X
4. I Refi property X with a conventional loan from a local bank providing me with an 85K mortgage. Can the 85K go directly into my self-directed IRA?

Any insight/experience appreciated.

Thanks!

[George Blower]

@Mitch Black

@Chris Babcock

1. The loan can't be a conventional loan because any financing provided to an IRA/401k must non-recourse. Of course, the terms of a non-recourse loan are different because the only collateral is the property (i.e. shorter term, higher interest rate, lower LTV ratio, etc.).

2. You can't sell real estate owned by your IRA to yourself (or any entity that you own) as this would constitute a prohibited transaction.