Place to find quick education on self directed ira?

Question

I’ve done a few searches and couldn’t find any single place to educate myself.

Suggestions?

Background:

I received a “rollover ira” from my current employer in the form of a check sent to fidelity investments.   I want to use that as down payment on a property or two

Thanks

Brian Eastman · Answer

@Jim Stanley

Ultimately, you will want to get on the phone with a specialist in the field.  There is a good bit to know about properly investing your IRA into property.

There are a few plan types, with some offered by custodians acting as a 3rd party processing layer and others where a legal structure is created to provide you with checkbook control in either an IRA or 401(k) based format.  The best fit will depend on your situation and goals, but for operating a more dynamic asset like a rental checkbook control is generally superior.

The key thing to understand is that a self-directed IRA is a means to diversify your IRA.  All activities must be kept exclusively within the framework of the IRA and you must avoid any self-dealing.  So the plan is purchasing the property and would be the borrower if your plan is to use mortgage financing.  The plan pays all expenses of acquisition and operation.  The plan then receives all income produced from the property.

You can act as a "fund manager", so to speak, and direct the affairs of the IRA, but you may not benefit personally or add value to the IRA via the provisions of goods or services like sweat equity.

A mortgage for an IRA must be non-recourse, meaning no personal guarantee from you.  As a disqualified person to your IRA, you may not pledge your assets as security for the IRA's debit.  There are a handful of lenders that offer such loans.

In an IRA, there is a small tax that applies to the gains associated with the non-IRA (borrowed money) that is classified as Unrelated Debt-Financed Income.  Because real estate affords generous deductions, the tax impact is generally minimal.

The focus of real estate investing with an IRA should be to create passive income such as from rentals.  Trade or business activities like spec home development, flipping, and STR can be taxable as Unrelated Business Taxable Income and the impact there is less benign than the tax on leverage.

Using an IRA to hold real estate can be a good way to diversify and secure your future - if you know what you are doing.  Real estate is a solid asset with several potential income streams that are decoupled from the news cycle that drives the equities markets.

Will Fraser · Answer

Hi @Jim Stanley, my Self Directed IRA custodian is Equity Trust and their content surrounding how to use SD IRA accounts and examples of people who have maximized them has been a wellspring of inspiration.

Michael Plaks · Answer

@Jim Stanley

There is no single place. Every SDIRA custodian and administrator has a wealth of resources on their websites. Also CPAs, real estate gurus, law firms, financial advisors...

Google some of these sites with quality education for example:

• Sense Financial
• IRA123
• Quest Trust
• Equity Trust
• TaxReductionLawyer
• Assets101

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Place to find quick education on self directed ira?

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