Self directed IRA investing

[Komi Agbodzie]

Can I use a self directed IRA to buy equity in a real estate portofolio?

if yes, is it necessary to do this through an LLC within the SDIRA?

Thank you all!

[Brian Eastman]

@Komi Agbodzie

Well, your question is a bit broad to provide a precise answer. Getting on the phone with an IRA professional will be the best way to learn what will or will not work and the best approach based on your specific situation and goals.

An IRA may invest in a private entity such as a LLC or LLP that holds real estate.

That entity may have no controlling influence by you or lineal family that are considered disqualified persons to the IRA.

There are considerations that may impact whether such an investment will be beneficial to an IRA. The use of debt-financing creates a nominal tax exposure for an IRA through UDFI that is generally not a big deal, but certainly something to factor into your analysis. If the real estate entity is engaging in a trade or business such as new property development for immediate sale, or flipping of properties, that can generate exposure to taxation on UBTI, which can be more detrimental to the ROI. Passive income from rentals and lending is not subject to UBTI.