SDI for real estate in Chicago

3 Replies

Hello!

Looking into financing options for a rehab project. One financing option is to partner with my father (turning 62yrs old this year) for this first project. Would like to have this financing option planned/thought out before I find the right home for the project. I will use my current home and take out a line of credit to fund my half. He has some money in a 401K through work and plans on retiring in a few months. He is leaving it up to me to help him with investing his 401K and I feel that Real Estate will generate much larger returns than the stock market. I have been looking into Self directed IRA's so he can roll some of that into to use for RE investments. Any SDI companies anyone here can recommend(hoping for something local-Chicago- where I can actually sit down and talk with the person face to face as there are a ton of IRS rules that will need to be followed)? If not anything local, is there any SDI company you may recommend? Any insight as to if you think this is a good idea or not or what other options you may suggest and why? Also, any good or bad stories you may have on any experiences with this would be great to hear.

Thanks!

First, you may be forbidden from using his money while partnering with you. I am not an expert on this, but usually the Vertical family lineage are dis-allowed benefitters from IRA stuff.

In Chicago, for me, there is just one SDIRA company.. Midland IRA on LaSalle and Adams.

@Dale Stevens - and anyone else who can help. 

I did some research on this and was talking with the company "The Entrust Group" and asked those specific questions and pretty much found out that although I am considered a "disqualified person" at the time of initial purchase, your IRA can partner with anyone, including a disqualified person. But after the transaction is closed, your IRA cannot buy, sell, or transfer to any disqualified person. He can partner IRA funds with another investor on a new purchase and that investor can be anyone (including a disqualified person). Also, if we are going 50/50 on this that means it would have to be 50/50 in regards to all expenses as well as the the profit. He'll benefit more as he will not have to pay taxes on his profit but I will have to pay captital gain taxes (how much % is this usually?) Is the explanation I was provided correct, and is there any other rules to be aware of? I see BP advertises an SDI company called Broad Financial any insight on them? Anyone have experience with entrust group or MidlandIRA?

@Dale Stevens I will check out Midland IRA, thanks for the reference. Also if you would like I can find the link in my email of the info/FAQs entrust group sent me if you would like I can send it to you?

I have dealt with Midland. Very easy to deal with. I like them being local. As to your SDIRA being disqualified. Your father is not allowed to put in a penny. You need to be sure you keep immaculate records. If you put in $100 towards a repair, then, I believe, his IRA must contribute $100 as well.


The penalties are strict if you don't keep that in tact. 

Check out Midland's website.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.