Can I purchase a flip FROM my self directed IRA? Or vice versa?

4 Replies

I have searched the web for ~20min and can't find an answer on this. I'm asking because there's a general prohibition of direct or indirect benefit for the IRA owner...

If my self-directed IRA bought and flipped a property, am I eligible to buy it from the IRA in a for-sale-by-owner scenario (no agent fees)?

And vice versa, if I buy and flip a house and like it, is the IRA eligible to buy it from me?

@Caleb Christopher

You absolutely can not do that! IRS rules prohibit any transaction between self-directed IRA and a "disqualified person" (yourself). Regardless of the price, fees, etc. 

The other problem is flipping in an IRA. Flipping is considered an active business, income and gains from active business in an IRA would be subject to Unrelated Business Income Tax. Retirement accounts are designed to be invested passively (rentals, private lending, syndication, private placements, tax liens, etc). Please do your research and consult with a knowledgeable CPA before you doing a flip in an IRA.

@Caleb Christopher

You aren't able to manage the investment that you put your IRA into. If you had a colleague or friend that was managing it and doing all the work that would be acceptable. This is another reason that real estate notes are good. Once your IRA is large enough, becoming the bank for another flipper can be lucrative. Ie, instead of hard money at 8 to 12 plus 2 pts, you can do something similar for another flipper.