BRRR Refinance with Checkbook IRA

2 Replies

I've got a house under contract through the LLC owned by my SDIRA. I could simply flip the house but my long-term strategy is to acquire rentals through BRRRR so I'd like to do that here if possible. Non-recourse loans directly to my SDIRA are in the 65% LTV range, making this less than ideal from a BRRRR standpoint. My question is, does the fact that the LLC will own the property expand my refinance options at all, or would I still be limited on an LTV standpoint because it would be a non-recourse loan since I can't personally guarantee it?

@Jon Allen

The implementation of the LLC under the umbrella of the IRA does not change the rules in any way. The IRA is still at the core, and all IRS rules still apply. Any debt financing will need to be non-recourse and the use of debt-financing will expose the IRA to nominal taxation on Unrelated Debt-Financed Income (UDFI).

While the leverage is not as high as what you could achieve personally, the BRRR method of investing can be a great way to accelerate the growth of your IRA. I always remind folks that comparing the IRA to your taxable self is not generally applicable. Keep in mind, you are comparing what your self-directed IRA can do relative to what a conventional stock market IRA can do.

@Jon Allen

If you find a lender willing to lend you higher LTV non-recourse - you certainly can do that. There is only handful list of larger lenders offering non-recourse loans to IRAs and 401Ks, but nothing prevents you from finding a private lender and negotiating the terms with them. You might even have some friends or relatives who have cash sitting in a money market account earning less than 1% interest, if you offer them 6% secured by real property that could be a win-win for both of you.

Here is a list of lenders I've assembled over the years who offer loans to retirement accounts, you may find some lenders on the list that you were not aware of:

Good luck with your venture!