Lending Using Multiple IRA Accounts

5 Replies

When combining funds with another IRA for an investment such as being a lender/co-lender for the purchase of property, do funds have to be distributed back to the IRA based on the percentage of money invested or can it be based on the actual amount contributed or can funds be distributed based on percentage of OWNERSHIP which I assume would require some kind of agreement between the two lending parties. I see all the time when people are trying to grow small IRA accounts they "piggyback in" to someone who is the main money investor because perhaps they found the deal. How is this accomplished?

Is there a way for the points in a private lending deal to go back into the IRA of the IRA owner that found the deal and the rest of the funds be distributed based on the percentage of money put into the deal?

Thanks for the response!

It’s a bit hard to determine who is who in your question, @Sandy Uhlmann . It doesn't matter who your IRA partners with so long as it's not you personally or any other prohibited party. Of course, it must be also a permissible investment (i.e. no collectables, insurance, etc.).

All returns, whether they are interest payments, points, fees, rent, or simply profits from a deal must all be returned to the IRA. You cannot take any cut of these personally for yourself.

The percent cut of any returns from an investment that your IRA makes are completely determined by the agreement you make with the other investors. If all of you agreed that your IRA should keep all points, plus a percent of the interest (or fees, rent, etc.), then that's what your IRA should receive. This is no different than any deal made outside of the IRA.

There are no rules about how profits are divided so long as they do go to a prohibited party and you don't personally profit. You can make any deal for your IRA that you want.

@Jeff S. I was also lead to believe that you couldn't partner with yourself to make a loan but I'm hearing conflicting information on the Private Lender Podcast Episode 76 with Nate Hare from Quest IRA. At about minute 26:30 Keith Baker asks him if your IRA is allowed to partner with yourself to make a loan and Nate says that it is absolutely allowed. You just can't lend your IRA funds to yourself. As long as the person you are lending to is not a prohibited person.


… so long as they do go to a prohibited party …

Should be:

… so long as they do not go to a prohibited party …

I understood Sandy's question to ask about partnering between her IRA and someone else's. Not with herself personally. That's why I wrote my first sentence above. Nonetheless, it's absolutely true that you can partner with your IRA though it can be technically difficult to avoid self-dealing (and lending to yourself is self-dealing). Generally, the transactions have to be concurrent and you and your IRA have to be named separately. This is something you absolutely have to discuss with your custodian and even then, you'll probably get differing opinions.

Read here: How to Partner with Your IRA

and here: How to Partner with Your IRA to Buy Real Estate

@Jeff S. Thanks for the feedback. Yes, I do understand that there can not be any prohibited parties involved and all returns will be returning to our IRA accounts. My IRA provider kept insisting that everything had to be divided in the percentage of the amount invested-period. I finally got to speak to a rep from my IRA company that did confirm that the interest and points can be divided based on the JV agreement.

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