Use Self-Directed IRA to BRRRR

[Naveen Kumar]

Love the BRRRR strategy as a concept - just getting harder to find properties that can fit these days.

So a shift in strategy - how about borrowing money from my SDIRA LLC to buy an investment property, record the mortgage showing the LLC as a primary lienholder, and then do a rate and term refinance in the first 6-months to repay the LLC.

Is that allowed, or does it violate the Self Directed IRA rules?

Feedback, comments, concerns?

[Dmitriy Fomichenko]

Naveen,

You are not allowed to personally borrow money from your IRA - that is not possible (you could take personal loan limited to $50K from 401k but not from an IRA). You can buy an investment property directly in your IRA (or IRA owned LLC), and if you wish to use financing you must use non-recourse loan. 

If you wish to refinance property that you already own keep in mind that many non-recourse lenders will only use purchase price as the value of the property. To use appraised value you'll have to wait 2-3 years. Here is a list of lenders offering non-recourse financing to IRAs, explore what options they offer to see if any of their loans will work for you: 

https://www.biggerpockets.com/blogs/2810/50272-lis...