Self Directed IRA Question

6 Replies

Hi all!

Happy 4th of July week! Question, my partners and I own 6 multi family properties, around 200 units total. We have multiple deals under contract now and are looking at other syndication money streams, including those individuals with self-directed IRA's.

Do we need to do anything in order to receive funds for someone else's IRA?


Steve Lyman

@Steve Lyman

That's a great question that we encounter daily, with increasing frequency.

There's nothing that you "need to do" to qualify to receive IRA or 401K funds. However, (a) there are IRA/401k compliance concepts that you should be aware of and (b) you should develop an efficient method for accessing IRA capital - I'll often get introduced to syndicators that find dealing with IRA/401k money to be a huge nuisance, which it does not have to be.

On most syndicated deals there will be leverage involved, resulting - potentially - in taxable UDFI to IRA investors. The tax is not your responsibility, but knowledgeable IRA investors will want to see the relevant numbers reflected on their K-1s. 401k investors do not present this issue, as real estate acquisition indebtedness does not result in UDFI to Qualified Plans. (The potential UDFI tax can be mitigated with all the traditional real estate tax write-offs; mortgage interest, depreciation, etc.)

Another concept to be aware of is retirement plan prohibited transactions, which restrict with whom IRAs and 401(k)s can transact. Broadly speaking, utilizing your own IRA/401k funds, or those of certain related parties, is not allowed.

There's lots of nuance and strategy that can be implemented, but these are key starting points.

Originally posted by @Bernard Reisz :

@Yonah Weiss Appreciate the tag and glad to chime in here. FYI, just read your BP featured  blog post about accelerated depreciation tax write-offs using cost seg - powerful stuff!

 Thanks so much Bernard!