Using SDIRA for BRRRR...proper deal structure? Resources?

18 Replies

Hello everyone!

I am meeting with a friend this week who may be interested in lending me money for a BRRRR deal thru his SDIRA.

Does anyone have any advice on how to properly structure this deal?

Any recommendations on resources that discuss this process?

My plan is to borrow the money and in retrun give 12% ROI when I do the refinance.

I've done a lot of research on private money lending for cash, but the SDIRA bit is new to me.

Thanks in advance,


@Nicholas Morgan

The process is identical like regular taxable account:

  • mortgage/note on the property for the funds; 
  • property insurance to have the lender as lien holder
  • title insurance for the lender

The SDIRA account institutions; have forms to fill and the lender has to do that.  They would review mortgage/ note and then approve that along with the forms. They would usually wire the funds to title company who handles this closing; so the SDIRA lender gets title commitment.

@Saravanan Saravanan

Thank you for the info!

What if the funds from the SDIRA do not completely cover the costs?

Example: property costs 70k and needs 30k of Rehab and there's only 50k to be used from the SDIRA

Can I borrow from SDIRA as an unsecured private loan? I can't back with a title if I'm dealing with multiple private investors.

How would this situation work?



Originally posted by @Justin Kane :

is it annualized? its pretty simple a RE attorney could help you draft the docs

It would be an annual ROI. Does that answer your question?

Will I need to have an LLC setup so that the LLC borrows his SDIRA money or can I as an individual get the private loan from his SDIRA?



I believe as long as the SDIRA account holder is not benefiting directly you should be fine, but you do not need and LLC as the SDIRA is investing in the asset not the individual

You don't have to have an LLC, it's up to you... you can be the borrower, the property will be security for the loan, the IRA will be the lender. You will need assistance from escrow/title company to prepare proper documentation and record the transaction.

@Brian Gerlach ,

Yes there are similarities in terms that both are tax-deferred retirement plans, both can be self-directed allowing alternative investments. However, truly self-directed Solo 401k plan has several advantages over IRA:

  • It does not require a custodian, which will allow you to have "checkbook control" over your retirement funds
  • Contribution limit up to $62,000 for 2019 (nearly 10X of an IRA)
  • Allows tax-free investing with Roth sub-account
  • Allows tax-free personal loan from the account
  • Exempt from Unrelated Business Income Tax on leveraged real estate
  • and more!

As far as investments I personally prefer private lending and trust deed investing with my retirement account. The reasons are because it is truly passive, low risk (investment is secured by real property), guaranteed predictable returns (contractually). Of course you must do your due diligence upfront. 

If you start flipping in your retirement account - that would be considered an active business and result in UBIT tax. Retirement accounts are designed to be invested passively. 

Originally posted by @Brian Gerlach :

@Dmitriy Fomichenko Does a Solo 401k and SDIRA function similarly?

What type of RE investments make the most sense tax-wise to hold in them? 

Private money? Notes? Flips?

if you invest in actual properties or syndications, you lose the tax deductions that you would get in a taxable account

also, research recourse and non-recourse lending and their tax implications in retirement accounts

Thanks everyone for the info! It's been very helpful to me.

It seems to me that this is a fairly simple process then. For me, as the one being loaned the money, it seems it's very similar or almost the same as private money loan that is cash. One thing to note is I wouldn't secure the SDIRA loan with the real estate, it would only be a promissory note - so an unsecured line is all. This isn't an issue, is it?

From my friend's perspective, it sounds like it matters whether it's a solo 401k or an SDIRA. If it's an SDIRA he will need to get a custodian whereas if it's a solo 401k he's much more in control of the account and would not need a custodian. Is this correct?

Thanks everyone for your input,


@Nicholas Morgan

IRA can make secure as well as unsecured loan. I would not do an unsecured loan from my IRA.

Why would it be unsecured?

Generally your understanding is correct, although Solo 401K can be set up with custodian. The type of 401k depends on the service provider.

@Dmitriy Fomichenko

If the SDIRA loan is able to cover the entire cost of the house, then it will definitely be secured by the property. However, let's say the SDIRA loan is only $20k but the property is $60k. I will raise the other $40k thru other investors. Please correct me if I'm wrong, but I don't believe I can secure the SDIRA loan with the property if I have multiple investors for varying amounts. If this were the case, who would own the property if something went awry?



Originally posted by @Dmitriy Fomichenko :

@Nicholas Morgan

You could certainly do it this way, but if I was the lender I would want my loan to be secured.

Just find an investor who has $60K in an IRA to lend you. Keep things simple.

I 100% agree that is the best way to do it. Right now though, if I'm able to work with investors (friends and family who know me personally and trust me) who are comfortable with unsecured loan then I will definitely use it as I start building a real estate reputation and create a track record of putting deals together. I imagine after I do my first deal like this and my investors are all happy, that I could use this as a springboard to scale quickly. That way when I talk to future investors who have more cash to invest I can point to this deal and use my investors as references.