purchasing with self-directed retirement acct?

Question

hey y'all. does anyone have experience buying property with their self-directed retirement account? and how'd you do it? thank you in advance!!

i don't have experience with this, so i would love any insight. i have a buyer who wants to purchase using her self-directed 401k. and she's been told that she would need to use a nonrecourse loan. if anyone has any insights or connections to lenders who can help, i'd greatly appreciate tapping into your knowledge!

G. Brian Davis · Answer

Some members in my Investing Club have used SDIRAs to buy property, and it’s a great strategy when done right. Here's what is important to know: The SDIRA itself owns the property, and all income and expenses flow through that account, not your personal funds. Because the IRA is the buyer, you can’t personally guarantee any loan, which is why nonrecourse loans are required. The lender’s only collateral is the property itself.

You’ll need a custodian that specializes in real estate IRAs and can wire funds, receive rent, and pay expenses directly from the account. Just be sure to avoid prohibited transactions, no personal use of the property, and don’t pay for repairs out of pocket.

Brett Synicky · Answer

@Megan Mcclung

Non-recourse lenders

A Solo 401k is better than an IRA for investing in real estate with leverage since the 401k is exempt from UBIT on leveraged real estate unlike an SDIRA. Client is a disqualified party so has to be non-recourse.

Elealeh Fulmaran · Answer

You’re on the right track: with a self-directed 401k/IRA, the account or its LLC buys the property, all income/expenses flow through the custodian, and any debt must be nonrecourse with no personal guarantees or prohibited transactions. Biggest watchouts are UBIT/UBTI if you use leverage, no self-dealing (you and lineal family can’t live in or work on it), and tighter rehab logistics since you can’t front costs. Practical path: confirm rules with the custodian, price the deal with conservative leverage, get term sheets from lenders who specialize in nonrecourse to retirement accounts, and decide if lending your SD funds to an unrelated investor is cleaner for your first move.

purchasing with self-directed retirement acct?

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