Funding Real Estate with a Self-Directed IRA

[Brad Parkes]

Hi Everyone!

I am looking at moving my IRA and Roth IRA from mutual fund investments to real estate. I understand to do so, I will need to convert it into a self-directed IRA. Ideally, I would like to use the funds for down payments on investment properties.

Are there any custodians that would be recommended?

Also, are there any intricacies that I should know about a self-directed IRAs. 

Thanks so much!

[Dmitriy Fomichenko]

Brad, if you intend to buy real estate with your IRA and want to use leverage, you are not allowed to go with conventional financing, the loan must be non-recourse. There is a handful number of banks who specializes in this kind of loans, let me know if you want the list. You can also obtain non-recourse loan from private investors (who also could use their IRAs to provide the financing for you, in other words their IRA would be the bank).

Since there is no personal guarantee with non-recourse loan the down payment requirements are higher, usually 30-50% down depending on the location and property type.