Using an SDIRA to invest in a third party's flip

[Kathy Henley]

I have been offered an opportunity to invest a fixed amount in a proposed flip, in exchange for a 50/50 split of the net proceeds. I would like to use money from a self-directed IRA to do this. I would be 100% hands-off regarding the rehab, the resale, and everything else from A to Z. Two questions: (a) Is this a prohibited transaction? (b) Will my share of the proceeds stay in the IRA, tax free?

[Dave Van Horn]

Hi Kathy,

In answer to your questions this is not prohibited and your 50% split of the profits are tax free, you can also verify this with your accountant or self-directed IRA custodian. Best of luck!!

Dave