Homeowner · Whitewater, WI · Member since 2011 · 16 posts · 4 votes
I'm trying to figure out how to ask this--I feel like I have 3 pieces of a 500 piece puzzle.
What I have:
-Self Directed Traditional IRA which has sufficient funds for a down payment for a property, but not for an outright purchase.
What I want:
A non-recourse mortgage using SDIRA money for a down payment.
I'm not sure I can even do this--I went to the State Foreclosure Laws page and looked at Wisconsin, but don't really know what I'm reading. I didn't see the word 'recourse'.
I guess what I'd like to hear from anyone reading this is what would be the best course of action for investing this SDIRA given the above circumstances.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
14y
Andrew, I will take a stab at your questions. You can "partner" with your IRA, but as I stated before, there are rules and limitations to it, you should consult a tx professional on this who is familair with SDIRA's.
As far as flipping, you need to know that flipping homes directly competes with non-IRA entities and as such, profits are subject to UBIT, rehardless if you have a pertnership with the IRA in which the IRA held 60% and your funds outside the IRA held 40%.
If the additional funds needed was say $10k or less, and if you are married, you could simply place that $10k into the IRA as your annual max contribution.
Better yet, if you are self employed and have no full time employees (other than your spouse) you can set up a solo 401k plan in which the max contributions are much higher than that of an IRA, you have borrowing provisions of up to $50k or 50% of your vested interest, and using debt financing in the 401k is not subject to the UDFI which triggers UBIT.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
14y
@ Daniel - I am not 1005 sure as it has been quite a while since I looked at it, but I believe that one of the rules regarding your IRA partnering with funds outside of your IRA - the IRA must have at least more than 50% of the partnership and from what you have mentioned, it sounds like your IRA % is well under that in your example.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
14y
Here is a copy and paste from the IRS publication involving prohibited transactions:
"[NOTE: The term "disqualified person" under the Internal Revenue Code does not include siblings (brothers and sisters) or aunts, uncles and cousins of the IRA owner.]
Service providers of the IRA (e.g., IRA custodian, CPA, financial planner);
An entity (such as a corporation, partnership, limited liability company, trust or estate) of which 50% or more is owned directly or indirectly or held by a fiduciary or service provider; also a 10% or more partner or joint venturer of such entity;