I am looking to possibly wholesaling empty townhome lots in St Cloud, FL with my SD IRA LLC. Has anyone had any experience with this? Do you need to apply for any permits? Has it triggered any UBIT for you? Any insight would be greatly appreciated, thank you so much in advance!
The short version is that if you plan to do wholesaling yourself within your own SDIRA, it will be a prohibited transaction and result in disqualifying your SDIRA and hefty penalties.
This idea can only work in a very rare scenario when you essentially lend your SDIRA money for someone else's wholesaling business. Not when you are working this business yourself and not when you are using proxies, either.
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
7mo
Hi Tina, Tampa here. I'm honestly curious as to the plan. I would normally think that a wholesaler would enter into a contract and then assign/sell that contract to "Party C". Are you taking possession of the property in your IRA or an LLC owned by the IRA in a double close? Just asking an honest question to understand the mechanics of what you're proposing to do.
I was trying to avoid the double close since that's probably going to incur more fees plus the fact that I wouldn't have enough funds in the IRA to cover the first close. Plus that would probably mean I would need to have 8 different closings then to turn around and close to a single buyer. Just trying to see what is possible and how to execute the transaction correctly since SDIRA LLCs are tricky.
I am looking to possibly wholesaling empty townhome lots in St Cloud, FL with my SD IRA LLC. Has anyone had any experience with this? Do you need to apply for any permits? Has it triggered any UBIT for you? Any insight would be greatly appreciated, thank you so much in advance!
The short version is that if you plan to do wholesaling yourself within your own SDIRA, it will be a prohibited transaction and result in disqualifying your SDIRA and hefty penalties.
This idea can only work in a very rare scenario when you essentially lend your SDIRA money for someone else's wholesaling business. Not when you are working this business yourself and not when you are using proxies, either.
Can I wholesale properties under my own name or do I need to have an LLC to be able to do that?
It seems you are asking about straight old-fashioned wholesaling without using your retirement accounts. For tax purposes, using an LLC does not change anything at all. (Well, for a high-volume or high-margin wholesaling, an S-corp might be considered, but it's an entirely different conversation.)
However, using an LLC can change the logistics of closings and your legal rights. So this question should be asked of fellow wholesalers in your geographical area, because the rules and the practical reality are state-specific and sometimes even location specific.