SDIRA 4 rental purchase - expenses may put a drain account

4 Replies

Hi

I posted earlier on the use of the SDIRA with regard to UBIT and received some very good answers that I could then go off in a direction to learn  more.

Upon looking over this venture and reading other peoples similar deals, it dawned on me that the SDIRA may not be the best use for rental property. 

Expense payments need to come from somewhere and if it's not the rental proceeds then the SDIRA could in fact be tapped for the additional expenses. I don't want that kind of carte blanche on my account.

Somehow out-of-pocket (which cannot be done in the case of using SDIRA owning the rental) would be a better fit instead of depleting a retirement account that has taken years to build up.

I am now wondering if this is the best investment venture and use of the SDIRA money.

Who else has used there SDIRA for rental property?

Pros/cons I should be aware of besides having to use additional SDIRA money for upkeep of the property (by the way has already been rehabbed but still there could be something in need of funds).

Thanks

@Daria B.

If the rental purchase and upkeep is negative I don't think you should buy it. Unless you need a tax write off but I only buy to make money and I use my Roth IRA to shelter the rent. It makes $$$$ even after expenses. If not I would get rid of it.

Compare it to other investments you would make in your Ira and pick the best ROI. I like tax free income from real estate it works for me. Invest in what you know and understand.

Originally posted by @Carl Fischer :

@Daria B.

If the rental purchase and upkeep is negative I don't think you should buy it. Unless you need a tax write off but I only buy to make money and I use my Roth IRA to shelter the rent. It makes $$$$ even after expenses. If not I would get rid of it.

Compare it to other investments you would make in your Ira and pick the best ROI. I like tax free income from real estate it works for me. Invest in what you know and understand.

 Sage advise: Invest in what you know and understand.

I’m trying to learn about other types of investments and along the way  am finding the numbers just don’t work for what I want as a return verses risk. Better to read and discuss than to jump in blindly.

@Daria B.

You bring up a good point as only IRA funds can be used to pay expenses in connection with the IRA owned property. Just like all the rental income and proceeds from the sale of the home have to flow back to the IRA, all expenses must also be paid using funds from the IRA owned property.


Investing your IRA in real estate is just another way of diversifying your retirement funds.

If I am understanding your questions correctly, you WOULD ben paying for 'maintainence' from 'rent proceeds' as ALL rents must flow back INTO the SDIRA account and will be there to pay for the maintainence. 

To me, it really seems no different than  holding rentals in a regular cash method, other than you should have even MORE reserves to pay for maintainence since you can not take any posative cash flow. 

Dan Dietz