Investor · Richmond, VA · Member since 2013 · 347 posts · 191 votes
I have a checkbook control Roth IRA in which I recently purchased a small single family home for long term rentals. For my non-IRA rentals I have a separate savings account to hold all the rental deposits since you are not supposed to co-mingle deposits with other funds. For the SDIRA I have a checking account for the LLC which I set up at a different bank from all my other checking just to prevent any accidental transfers between accounts that might cause a problem. So -- my question is about the deposit for the house owned in the SDIRA. Should this go into the LLC that the SDIRA owns or should be it be held outside of the IRA?
Rental Property Investor · Reedsburg, WI · Member since 2011 · 1k+ posts · 857 votes
12y
Hi,
Great question, but I am not sure of the answer either. I also own a SDIRA that owns my LLC that holds the property. I too do the checkbook control thing. We just put it into the SDIRA/LLC checkbook. We do have a balance of many times the deposit amount, so didn't even give it much thought.
I'll be interested to here the input from those more experience than us :)
Since you have to have a property manager and aren't allowed to manage your own IRA properties, shouldn't the manager have the security deposit in their escrow account. Otherwise you could be in violation of BOTH Federal and State law. Federal law for self managing and state law for not escrowing security deposits, depending on your individual state laws.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
12y
@David Krulac I discussed this very point with my attorney when I set up my IRA-LLC. His opinion was that you could manage rental properties owned by your IRA. You can't work on them, but management is considered a low effort job that won't violate the IRA rules. This was an attorney who works in this area. Now, I know other folks have posted contrary opinions on this topic. And I don't own rentals in my IRA for reasons I've posted several time, including earlier today. But I was advised it was OK to self manage if I chose to do this.
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
12y
@David Krulac I own 2 rentals in my IRA and I have also been advised it is ok to self manage, though I personally choose not to for multiple reasons but one includes the self managing grey area.
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
12y
@Jon Holdman Thanks. I was advised by an attorney also, specializing in real estate and IRA, that managing property in your own IRA was "third rail."
That's part of the problem that there are diverse opinions by no defined guidelines. The attorney that i consulted had had several IRA cases before the IRS and was familiar with their process.
Investor · Richmond, VA · Member since 2013 · 347 posts · 191 votes
12y
Interesting points. So .. for the sake of this discussion, let's assume that it is OK for me to act as a property manager. What is the proper way to handle the deposit funds?
Investor · Pawleys Island, SC · Member since 2008 · 1k+ posts · 837 votes
12y
In some states, the landlord tenant law requires security deposits be held in a separate account and not co-mingled with personal or business operating funds. Why not have your SDIRA open a separate savings account to hold your security deposits, or, have your LLC open a separate account for security deposits.