My idea is to use $15,000 of my SD-IRA along with $17,000 cash to buy a flip for $32,000. ( The rest of my SD-IRA is currently loaned out to a vet flipper).
I would like to "charge myself" 1% interest annualized, and return $15,000 + $1,500 in interest back to my SD-IRA. The rehab is approximately $10,000 and the ARV is approximately $80,000.
I'm only $42,000 out of pocket, plus all the costs, the PM fees, the seller commission when it sells, etc. etc. I know the ROI of my cash is somewhere in the ballpark of $10,000 maybe $15,000, but, I think it will be a great exercise for my first deal.
Do any of you more seasoned REI vets have any thoughts you'd like to share with me? About either combining SD-IRA and cash? Or, about the deal? This particular property price is too small for a hard money loan. Time is of the essence to put my cash to work before it runs out!
The short answer is NO. You can't commingle your retirement fund with your personal money. Your IRA is its own entity. That's not you...but you do "own it"...kind of.
As @Joe Villeneuve notes, this is not an allowable transaction. What you are proposing is no "comingling" of funds, which is not allowed, but an actual transaction between your IRA and yourself in the form of a loan. You absolutely may not transact between the plan and a disqualified party in any fashion - whether direct or indirect. To do so would disqualify the entire IRA, not just the $15K involved in the transaction.
Stick with lending to unrelated 3rd parties.
You are considered to be "disqualified person" to your IRA and as such not allowed to enter into any transaction with your IRA.
Thanks guys. Back to the drawing board....
While one can partner with their IRA or solo 401k to invest in real estate by pooling their funds in an LLC, for example, very specific rules apply including not receiving any type of commission and not using debt financing. Bottom line, those wishing to pool funds to invest in real estate should work with a competent professional.
THank you George!
I agree with @George Blower .
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