Investor · San Francisco, CA · Member since 2014 · 78 posts · 10 votes
I have a defaulting promissory note in my SDIRA. It seems like the house could be a decent rental, but the property needs rehab and I have no funds in the SDIRA to pay for the rehab to get it rental ready.
I do have an outside IRA, but the funds in there might not be enough.
I have a 457 plan through my current employer, but that does not allow me to transfer funds to the IRA.
My employer also does not allow me to contribute to an outside plan.
Do you know of any other options on how I could get funds into my SDIRA to rehab the property?
Someone said I could get a non recourse loan for the SDIRA. Does anyone have experience with this or could recommend a lender?
Under normal circumstances, you could not rollover funds from your 457 plan. The CARES act may give you the option to effectively take a distribution from that plan and then separately roll that over into your SDIRA - assuming you can claim a qualifying impact from Coronavirus. Speak with your CPA.
If not, the SDIRA could obtain a loan or take on an equity partner in the deal. Any such transaction would need to avoid disqualified persons to the IRA such as you, spouse, lineal family. etc.
I doubt you would have luck with a bank loan. Search for private lenders by networking.
Just because the note is in default doesn’t mean you get it. Your Ira has to foreclose and most likely have an auction for the amount owed. If it doesn't bring enough to satisfy your note then your Ira will become the owner. Other IRAs can lend your Ira the money with a non recourse loan, or another private lender, Or NASB.com or Ira lending.com or as @Brian Eastman noted sell some equity or make a deal with a contractor. The covid distribution as explained by Brian May also help. You have a lot of options. You can sell part of the note as well. I don’t understand how your employer won’t allow an outside Ira even if you work in the financial field. You need to show it isn’t competition to your employers company.
The IRA is bringing a certain amount of value. Another investor could bring some cash for rehab and partner with the IRA. The equity in the resulting rental property would be negotiated based on value contributed by each party to the transaction. Work with a real estate attorney on the mechanics.
All that would matter from an IRA/IRS perspective is that the partner not be a disqualified person.
Specialist · Houston Tx · Member since 2020 · 34 posts · 16 votes
6y
@Anja Brey I would also like to add, clarify if your employer doesn't allow you to contribute to an IRA. It may be that they do not allow you to contribute to any other "employer plan". I find it odd they would have such restriction on IRA contributions. The points the above gentlemen have given are great!