not sure if this is the appropriate forum, so I also posted on one other forum. here goes:
SD-IRA, checkbook control (LLC). want to purchase multiplex for 290k but finance around 30-40%. I am told that the loan to the LLC must be non-recourse. is this correct? uDirect supplied me with a list of lenders that they know who make non-recourse loans.
1. does this sound correct?
2. anyone out there have any experience with lenders making non-recourse loans in this situation?
thanks in advance
Good question and yes if the IRA is the sole member of the LLC. For a list of lenders, see the following:
That is correct, a SD IRA can only use non-recourse financing. Typically, a regular loan is guaranteed by a person. However, as the plan owner, you cannot guarantee the loan, as it would be a prohibited transaction. This is when a non-recourse loan comes in. The loan is secured and limited to the property itself, so you, the plan owner, doesn't have to be involved.
Note that the use of a non-recourse loan for an IRA will lead to Unrelated Business Income tax, which is calculated on the portion of income financed by the debt. A Solo 401k, on the other hand, can use non-recourse loans without UBIT.
There are many lenders who offer non-recourse loans to self directed IRA/Solo 401k plan owners. I also put together a list of lenders and their loan offer/requirements here:
Also, don't forget that all expenses relating to this property will need to come from the IRA as well. So aside from the purchasing price, make sure that you have enough reserve in your IRA (or through the loan, partnership, etc) for other expenses, including repair and maintenance.
@Dmitriy Fomichenko awesome info, thank you. so if i finance 50%, then half of the income generated by the property is subject to UBIT?
First $1,000 is exempt and in addition you can deduct half of the expenses (property taxes, insurance, etc.). Be sure to work with a knowledgeable CPA if you decide to move in this direction.
@Dmitriy Fomichenko i just got off the phone with my cpa. good advice as always. and i am also discovering that nearly every topic i bring up one this forum has been discussed thoroughly in the past. the "search" feature of this site is invaluable.
I have a SDIRA I use to acquire real estate. A non-recourse loan is required and I can assist you with this. Please let me know.
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