Self directed IRA investment, cash out.

[Caleb Landry]

Trying to come up with a strategy for a first investment. The whole Self Directed IRA or Checkbook IRA sounds great in parts. My Question is: If you use a Self Directed or Checkbook IRA for the down payment on an investment. Is the whole investment considered to be in the IRA account? For instance if you have rental income, can you pay yourself? Or would that be a distribution from the IRA, which would bring about early withdrawal penalties etc? Thanks in Advance!

[Brian Eastman]

@Caleb Landry

A self-directed IRA is not a means for YOU to invest in real estate with that tax sheltered money. Rather, it is a means to diversify the IRA from stocks into real estate.

If IRA funds are used, then the IRA is on title to the property and the IRA would be the borrower on the mortgage (which must be non-recourse). All expenses are paid by the IRA and all income is returned to the IRA.

It is no different than if your IRA invested in shares of XYZ co. Do the dividends issues to shareholders go to the IRA or to you? They go to the IRA.