Self directed IRA for first rental house purchase

[William Harmon]

I'm considering using my IRA as self directed to buy my first rental property and I have several questions. I have roughly 25K in a traditional IRA to invest. I'm looking at a turnkey property.

1. If I use the IRA to fund down payment for the purchase how much or what percent should I leave in reserves for the unexpected?  I assume I need more than a normal investor in reserve due to needing separation of my personal finance and the IRA.

2. The basic understanding I have is for a self directed IRA or checkbook IRA a custodian company forms a LLC and you get a check book. Then you set up a trust which owns the property? Anyone have experience doing this? if so how did it go?

3.To set up the trust I'm assuming I use a lawyer? Should I consult with a CPA as well before starting the process?

[Dmitriy Fomichenko]

@William Harmon, welcome to BiggerPockets and congrats on your first forum post! You are in the right place to learn all about REI including self-directed IRA. Brian provided you with good answers, but let me add couple more things:

• Custodian will not form an LLC for your IRA. Their job is simply to hold your IRA assets and follow your investment directions. To create a Checkbook IRA you will need a facilitator company (Brian, myself and few other contributors here on the forum can help you, do your due diligence)
• Investment property can be financed in an IRA, you must use non-recourse loan, there is a handful of lenders who specifically offer this kind of loans, here is a list that I compiled, hope you'll find it helpful: https://www.biggerpockets.com/blogs/2810/50272-lis...
• Using leverage will result in UBIT on portion of the income of the IRA, not a deal breaker, but you must be aware of this
• Self-directed Solo 401k is exempt from UBIT on leveraged real estate, consider this option if you are eligible 
• LLC inside of an IRA + Trust seems too complicated, keep things simple if possible