Loaning Money to an SDIRA

[Ed W.]

Scenario:

An SDIRA owns a property.

The beneficiary of the IRA wants me to loan money to the IRA so that the property can be rehabbed.

My understanding is that the loan to the IRA has to be non-recourse.

My understanding is that beyond the IRA having no financial responsibility that, additionally, the beneficiary of the IRA cannot personally guarantee the loan in any way.

I don't know of any reason to not use a cognovit note. Are there reasons that a cog should not be used?

There is at least one party who has some kind of interest in the property (it may be a formal or informal interest). I won't know for a few days what, if any, that interest is.

Whether or not that second party has any formal interest in the property, if that second party (totally unrelated to the SDIRA that owns the property) signs a separate cog guaranteeing the money, is there any problem with that?

Are there any other considerations that I'm not aware of that have to be taken into account?

Thank you for your assistance.

[Dmitriy Fomichenko]

@Daniel Dietz

There are no restrictions like that, you can have loan that is interest-only, fixed or adjustable, 1 year loan or 40 years loan, or anything in between, fully amortized or balloon at the end of x-number of years... as long as the loan is non-recourse. This is between you and the lender to negotiate.