Rental Property Investor · Costa Mesa, CA · Member since 2015 · 53 posts · 23 votes
Hey BP,
I am looking to roll my Simple IRA into a SDIRA so I can have control over this money and invest in real estate. I was originally intending to use these funds for fix and flips, but since I cannot be involved in the labor aspect and I will get taxed at 40% ( UBIT ) on the gains, I am looking into lending this money to other fix and flip investors so that my gains can grow tax deferred. What kind of return are you getting on these loans?
Sorry, I can't be very helpful in terms of my specific returns but the most common way of private lending in an IRA is via promissory note. This essentially lets you and the borrower set terms that are agreeable for both parties. The return is going to greatly depend on who your lending money to, for what purpose, and how much they are willing to pay for borrowing the money. For fix and flips, I would assume you would need to be around the same rate as a traditional HML, unless you are willing to adjust your risk outside of what they offer.
Full disclosure, I do participate in lending from my IRA, I am an employee of a self-directed IRA custodian.
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
11y
The rates are tailored to the borrower and the project. Experienced rehabbers who are putting significant amounts of their own funds into solid projects represent much less risk than inexperienced borrowers who do not have their own financial resources. As the lender, you must gauge your risk tolerance and decide whether you wish to risk lending on a project and, if so, what return you require.