Self Directed IRA Questions

2 Replies

My Dad is trying to buy raw land in Michigan by rolling over his traditional IRA to a Self Directed IRA. This is a long-term investment. I understand we cannot use this for personal use. I have a few questions that maybe the BP community can help with:

1) We want to build a pole barn on the property. Not for personal use. Simply to increase the resale value of the vacant land. Can we do this?

2) If we wanted to divide it up and sell the property in smaller parcels could we do that?

And one last side question unrelated to my situation...

Can I buy real estate that has a dwelling with the intentions of flipping the property to get a positive return using the money in the Self Directed IRA?

I understand this is a complicated transaction and I am in the process of talking with an accountant...any insight would be helpful. Thank you!

John,

To be clear, I am not a self directed IRA provider, but a non recourse lender who has a decade of experience in this area. From my perspective:

1. Your father's SDIRA could hire a contractor (unrelated person, not a disqualified party) to build a pole barn on that raw land, as long as he or you did not use your own labor or materials for that. All must be purchased by the IRA.

2. Conceivably his IRA could then divide and sell the smaller parcels as long as all the proceeds were put back into the
SDIRA, and none of the sales were to Disqualified Persons. 

3. Flipping real estate is possible but you must check the rules, as if it is a continual business, and not a once a year deal, there may be UBIT taxes potentially on the profits of such a venture.  

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