I am considering rolling over a simple IRA into a self directed IRA. It seams like a good way to get some initial capital for a down payment on an investment property. My main concern is what happens one you have to start taking RMD's (required minimum distributions) when you reach 70 1/2?
A self-directed IRA functions just like any other IRA when it comes to RMD's, which based on your profile picture would look to be a long way away. You simply need to ensure that your investments produce sufficient liquidity to meet your distribution requirements. An investment property is producing 5% returns, will mean that you can meet your RMD requirements without needing to sell the property until you are in your mid 80's.
If your IRA does not have enough liquid funds to satisfy the RMD, you will need to distribute part of the IRA owned real estate (in-kind) distribution, which can become a headache as an appraisal will need to be performed on the property. Another option is to process the RMD from an different IRA. To learn more about the RMD rules, see the following.