Wholesale Property with Self-Directed IRA

5 Replies

Can you wholesale property that you don't own using your self-directed IRA? My IRA custodian doesn't allow that... I wonder if this is custodian specific or a general IRA rule.

@Andrew Y.

The process is allowable, but is an activity that may generate exposure to UBIT if conducted on a regular or repeated basis. it is also difficult to engage in wholesaling with your IRA without providing services to the IRA, which may be why your current custodian is not willing to process such deals.

Short term gap funding to an unrelated wholesaler or other such strategies may better fit within an IRA, where everything needs to be very much at arm's length, and where passive income is tax favored (as opposed to trade or business income such as this).

@Andrew Y.

Probably will not be possible with most custodian, that is why you would have to use Checkbook IRA (aka IRA owned LLC). But like Brian said be sure of the exposure to UBIT. Retirement accounts are designed to be invested passively (i.e. rental property, trust deed, note fund, syndication, etc.)

@Andrew Y.

Great answers as usual from @Brian Eastman and @Dmitriy Fomichenko  

You can do it in an IRA but as they mentioned UBIT will most likely be due if you make money whether it is done in a checkbook LLC or with the Ira custodian.

The issue as to how much work you do personally is not understood by me so I can’t comment on that.