I’m looking to make an offer on a 6plex. I would be using an sdira with commercial loan. I realize this would create an UDFI situation. The units are 1br 1ba. I’m attracted to the deal because of building appreciation and cash flow.
I’m wondering are there big watch outs when using this strategy either with the type of property or financing.
Definitely get a CPA who is familiar with UDFI and a 990-T filing on board before you start. The impact of UDFI on your returns should not be overly significant and the use of leverage will definitely produce a better return than a comparable all-cash investment. That said, it is nice to know what to expect and also be prepared for proper recordkeeping so your cost of having the CPA do his/her job will be less.
The loan must be non-recourse, meaning no personal guarantee from you or any other disqualified party to the IRA.
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