Self Directed IRA’s - disqualified parties

[Robyn Gersh]

Hi All, I am looking to discuss who has used a self directed IRA to partner up with your own LLC to buy real estate. Can you rent your property to someone and then sublet it from them to get around the disqualification factors?

[Dmitriy Fomichenko]

@Robyn Gersh,

When you buy a property inside of your IRA you must use non-recourse financing. Conventional financing would not work with IRA because you are considered to be 'disqualified person' to your IRA and as such prohibited by the IRS rules to provide personal guarantee. 

Most lender will require personal guarantee but there is handful of lenders who specialize in lending to retirement accounts, but none of them to my knowledge would do equity line. You can get equity loan, however typically non-recourse lenders will require 30-40% down and seasoning before appraised value can be used. 

As Brian explained to you in his comment earlier, you are not allowed to receive any benefit from your IRA today, if you get an equity loan in your IRA you can't use that for personal benefits (buying residence), only for benefit if your IRA (buying another investment property).

You are correct: siblings, aunt, cousins, etc. are not considered 'disqualified', only immediate family members would. Your IRA would be allowed to enter into a transaction with your sibling, aunt, etc, but transaction must be 'arms length' meaning that there is no personal benefit to you.