BRRRR with SD-IRA Non-Recourse Loan Refi?

5 Replies

Hello BP! I'm in the process of transferring an existing IRA to a SD-IRA. I'm planning to purchase a SFR with cash (separate of the IRA $). Once I've acquired the property with cash, rehabbed, and rented - can I then use a non-recourse loan with my SD-IRA to finance the property? Thanks in advance for any advise : )

@Erin M.

You absolutely may not do that. IRS rules prohibit any direct or indirect transactions or benefit between you and your IRA.

The IRA may execute a BRRRR transaction from start to finish, but may not interact with a personal transaction of that type in any way.

@Erin M.

You can buy a property with your SD IRA. You can pay cash for it and do the cash-out refi later or use leverage to acquire it to begin with, the loan must be non-recourse since as "disqualified person" you are not allowed to provide personal guarantee for the loan.

You can do personal investments as well, separate from your IRA. But you may never commingle your personal investments with your IRA and vise versa. All transactions involving your IRA must be "arms length" which means that no disqualified person can be part of such transaction, directly or indirectly.

Hope this helps! 

@Erin M.

Since with self-directed custodial IRA each transaction must go through the IRA custodian it might be difficult to handle the investment which require many transaction. But there is solution: IRA owned LLC (aka Checkbook IRA), this vehicle allows you to bypass the custodian and have checkbook control directly over your IRA assets.