SDIRA and BRRR and HML/PML

[Akshay Bhaskaran]

Hi there!

I'm the process of rolling over my 401(k) to a SDIRA for the purpose of Real Estate Investment. I have been reading about the rules and processes of having a rental under SDIRA. It seems so complicated, but doable with proper guidance. 

However, I have one question for which I need little bit of help from you all:
- Everywhere it says you need to buy the property in cash with an SDIRA
- If I want to do a BRRR deal, where there are two costs involved: Purchase Price and Rehab Cost -- does both of these needs to come from within my SDIRA?
- Can I use the cash in my SDIRA to purchase the property, and use a PML/HML to rehab the property?
- After I rehab, and rent it out; when I go to a bank to do a cash-out refi, there will be a mortgage on the property: can my SDIRA hold properties with mortgages?

Thanks in advance for the help!

[Chris Seveney]

Quote from @Akshay Bhaskaran:

Hi there!

I'm the process of rolling over my 401(k) to a SDIRA for the purpose of Real Estate Investment. I have been reading about the rules and processes of having a rental under SDIRA. It seems so complicated, but doable with proper guidance. 

However, I have one question for which I need little bit of help from you all:
- Everywhere it says you need to buy the property in cash with an SDIRA
- If I want to do a BRRR deal, where there are two costs involved: Purchase Price and Rehab Cost -- does both of these needs to come from within my SDIRA?
- Can I use the cash in my SDIRA to purchase the property, and use a PML/HML to rehab the property?
- After I rehab, and rent it out; when I go to a bank to do a cash-out refi, there will be a mortgage on the property: can my SDIRA hold properties with mortgages?

Thanks in advance for the help!

 You can get financing for a SDIRA but there are only select banks that do it because its non recourse. Also realize that the amount you finance vs. cash you end up paying taxes on that amount. I recommend speaking to your custodian about this. There are also people on here like @Brian Eastman who can add more to this. 

Also realize you cannot lift a hammer as part of the BRRR and need to hire everything out as well.

I honestly would not do BRRR with a SDIRA because once you finance it you are paying taxes anyways.