Raising Private Capital from SDIRAs & HSAs
Investor · Georgia, USA · Member since 2023 · 51 posts · 14 votes
Raising Private Capital from SDIRAs & HSAs
Most Popular Reply
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1yQuote from @Henrry Novas:
Hey everyone,
I'm looking to learn how investors raise private capital from Self-Directed IRAs (SDIRAs) or HSAs for real estate deals. I know custodians like Equity Trust, Quest Trust, and Advanta IRA allow this, but I'd love insights from those who've done it.
- Best way to approach potential lenders?
- Key things to present the opportunity properly?
- Common hurdles when working with SDIRA lenders?
- Any recommended books, courses, or experts to learn from?
I’m raising funds for new construction projects and want to fully understand the process before talking to lenders. If you’ve structured deals this way, I’d love to connect. Appreciate any insights!
We have raised tens of millions from SDIRA investors and here is what we have found:
1. Best way to approach them is through education. Providing free education and explaining to them what you are doing works best. Being all salesly and trying to sell them on something typically has not been a great strategy.
2. Key things to present - The biggest difference between a SDIRA investor and a cash investor is UDFI/UBIT - I would present everything you were going to present but then include this factor. Are you taking on any bank leverage and will that impact the SDIRA where they have UDFI? Saying the answer is no and then having it be a yes will lead to a lot of upset investors.
3. Common hurdles is going through the paperwork to get the investment through the door - paperwork can be more tedious.
4. I do not think there are any books out there specific to this, what I would say is experience is the key - make sure you have experience and a great legal team to setup the structure and any SEC exemptions you need to raise money.
7e investments53 Reviews
4 Replies
- 1yJason MalabuteBusiness MemberAccountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 897 votes
Great question! One of the biggest attractions I’ve seen when raising capital through Self-Directed IRAs (SDIRAs) is that investors don’t need liquid cash on hand—they can put their retirement funds to work in real estate. It opens the door to investors who are interested but may not have readily available capital.
That said, it’s crucial for both sponsors and investors to understand the tax implications. For example, investing through an SDIRA can trigger UBTI (Unrelated Business Taxable Income) or UDFI (Unrelated Debt-Financed Income), which could result in tax liability even inside a tax-advantaged account.
Malabute & Company CPAs525 Reviews - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
Quote from @Henrry Novas:
Hey everyone,
I'm looking to learn how investors raise private capital from Self-Directed IRAs (SDIRAs) or HSAs for real estate deals. I know custodians like Equity Trust, Quest Trust, and Advanta IRA allow this, but I'd love insights from those who've done it.
- Best way to approach potential lenders?
- Key things to present the opportunity properly?
- Common hurdles when working with SDIRA lenders?
- Any recommended books, courses, or experts to learn from?
I’m raising funds for new construction projects and want to fully understand the process before talking to lenders. If you’ve structured deals this way, I’d love to connect. Appreciate any insights!
We have raised tens of millions from SDIRA investors and here is what we have found:
1. Best way to approach them is through education. Providing free education and explaining to them what you are doing works best. Being all salesly and trying to sell them on something typically has not been a great strategy.
2. Key things to present - The biggest difference between a SDIRA investor and a cash investor is UDFI/UBIT - I would present everything you were going to present but then include this factor. Are you taking on any bank leverage and will that impact the SDIRA where they have UDFI? Saying the answer is no and then having it be a yes will lead to a lot of upset investors.
3. Common hurdles is going through the paperwork to get the investment through the door - paperwork can be more tedious.
4. I do not think there are any books out there specific to this, what I would say is experience is the key - make sure you have experience and a great legal team to setup the structure and any SEC exemptions you need to raise money.
7e investments53 Reviews - 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
ON the ubit /udfi I always throw it back on the investor make them check with their own CPA I dont want to take on liability giving tax advice.
Also starting out in my experience this is very belly to belly. With no experience I found I had to start with warm contacts you know people you know well.. and or your own money get some wins.. then expand from there.. contributing your own cash to deals up front can be very beneficial.
However on the flip side if you have no track record and No real cash of your own .. then this becomes almost mission impossible out in the open market your competition for the same dollars will eat your lunch.
Obviously we have no clue about you or your finances but this is how I did it and its a long process took me personally years and decades.
- 1yBrett SynickyPro MemberSolo 401k and SDIRA Consultant · Orange, CA · Member since 2013 · 872 posts · 495 votes
Quote from @Henrry Novas:
Hey everyone,
I'm looking to learn how investors raise private capital from Self-Directed IRAs (SDIRAs) or HSAs for real estate deals. I know custodians like Equity Trust, Quest Trust, and Advanta IRA allow this, but I'd love insights from those who've done it.
- Best way to approach potential lenders?
- Key things to present the opportunity properly?
- Common hurdles when working with SDIRA lenders?
- Any recommended books, courses, or experts to learn from?
I’m raising funds for new construction projects and want to fully understand the process before talking to lenders. If you’ve structured deals this way, I’d love to connect. Appreciate any insights!
As @Chris Seveney said, lead with education I’ll add that you could partner up with providers or self directed retirement accounts and do collaborative webinars/podcasts etc. Offer to host them and drive traffic to the educational webinar so everybody has the opportunity to get more business. Later the script can be flipped and the provider can host you with their audience.
Be creative with what you present on these. Maybe it’s an offering but that needs to be a small portion of the talk. Maybe go through due diligence and some past deal examples. Just be careful cause this can be a dry topic if you run through too many numbers.
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