If the IRS deems that a prohibited transaction has occurred, then the entire self directed IRA is distributed to the owner. Moreover, if the distribution is premature, it may be subject to early withdrawal penalties
Can a self directed IRA enter into a loan agreement where the owner of the IRA is a guarantor
Melinda, this is considered a 'prohibited transaction' so stay away from it. Are you using this to acquire a property? If so I can provide with with the list of several banks who offer non-recourse financing with very good terms. Just PM me.
Pasadena, CA · Member since 2015 · 5 posts · 0 votes
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Thanks Dmitriy! Yes I am using the IRA to acquire a rental property. It would be great if you could post the list. I'm sure there are others that would like to have the contacts as well.
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
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Hi Melinda, the forum rules do now allow posting links here so I'll send it to you in a private message. And would be glad to provide it to others as well.
Developer · . · Member since 2014 · 520 posts · 162 votes
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Hi @Dmitriy Fomichenko, can you send the list. Can a self directed ira make a loan for something other than real estate? Is there a way to individuals who lend funds through their IRA?
I just want to make sure that both of us (as well as the readers) are clear on your question. Originally, the question was about using IRA to purchase a property and IRA getting a loan for that purpose. What you are asking is the opposite, you want your IRA to be the lender.
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
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You can lend our of your IRA using 'secured' note - against real estate.
Also, your IRA can do a 'unsecured' note (you better know the person well and have great confidence in repayment) or use other assets as security. But keep in mind the prohibited transaction rules would still apply and the loan transaction must be 'arms length'.
depending on the property and deal details you may be able to use one of the lenders from list I provided. You should also consider private lenders. While it will be more expensive but some other terms might be more favorable: higher LTV, quicker closing, etc.
Pasadena, CA · Member since 2015 · 5 posts · 0 votes
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I ended up setting up a solo 401(K) and have rolled my IRA funds there. I now need to find a lender that does loans to retirement plans. Does anyone have a list of lenders who will lend to 401K's Are there any special rules I need to follow with this type of retirement plan?
Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
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@Melinda Turner
You can learn about the non-recourse loan rules by reading the book titled, "Leverage Your IRA" by Matthew M. Allen who works for a bank that specializes in lending to IRAs ans solo 401k plans. It is also worth noting that UBTI applies to leveraged real estate held inside and IRA but not to solo 401k plans; this is one of the major distinctions between an IRA and a solo 401k plan.