SDIRA's as investing tools

[Bruce Rasquinha]

Hi, I'm a newbie to the world of real estate investments. I've got one rental property and would like to add to my portfolio. The rent from this property covers the mortgage. I also pay my mortgage for the house I live in. So, coming up with more capital to invest in another property requires some creative thinking. Thought I could set up an SDIRA and use this to get started. I do have equity built up in my home, but I don't want to be saddled with yet another payment. Appreciate your thoughts. 

[Brett Synicky]

Quote from @Bruce Rasquinha:

Hi, I'm a newbie to the world of real estate investments. I've got one rental property and would like to add to my portfolio. The rent from this property covers the mortgage. I also pay my mortgage for the house I live in. So, coming up with more capital to invest in another property requires some creative thinking. Thought I could set up an SDIRA and use this to get started. I do have equity built up in my home, but I don't want to be saddled with yet another payment. Appreciate your thoughts. 

 Many people invest in real estate using an SDIRA or even better a Checkbook IRA. Yes it will have UBIT on the portion of the income pro rata to the mortgage. It scales up to 37% once you get to around $12k of income but the UBIT is calculated after the first $1000 is deducted along with expenses and depreciation again only on the same % the property is mortgaged. Many opt for other investing methods in their SDIRA like private lending, crypto, private equity...anything except collectibles and life insurance.

Note that a Solo 401k is exempt from UBIT on leveraged real estate so if you have self employment activity and no full time employees save for you and your spouse you should consider the Solo K as an option. 

Bonus if you do any of this in a Roth account. It's not hard to understand the disqualified party rules and prohibited transactions.