All Forum Posts by: Carl Fischer

Hi @Marc Izquierdo. I agree with many of the previous posts - it is best to have the promissory note transaction facilitated by a neutral third party, whether that be an attorney or IRA custodian. To break it down, because the note is going to be unsecured, the title company would not necessarily need to be involved. If a note is secured, it means there is a type of security or recourse for the lender to take in the event the borrower is unable to pay. Usually the security is something along the lines of a mortgage on a property. In that situation, the title company would most likely be involved, because now the IRA is a lienholder on the property. If it is unsecured, the recourse available to the lender is not directly associated with a piece of collateral, like a mortgage. It is important to make sure that the lender on the note is the IRA as a separate entity than the IRA account holder and that the account holder never touches IRA money on the way out of OR back into the IRA. Once the note is drawn up between the two entities, the SDIRA will then send you the check/wire for payment.

You mentioned that the SDIRA is checkbook controlled. The only thing that changes in that case is the lender is no longer the IRA but rather the LLC that is owned by the IRA.

If you have any further questions, or would like more information on good attorneys in the PA area, I would be happy to connect.

There are several ways to take rents from iras without penalties. Use HSAS and ESAs early in life. You did ask for best tax entities and you are correct that you need to follow the rules. Overall it helps with a lot of taxes. 

@Mary Jay

No you can’t put the paid off property in your Roth. It is called self dealing and prohibited.

Real estate has a lot of tax benefits in itself. I also don’t like paid off property in most situations because it is money not working hard for me. I would consider financing the house and buying another property or lending the money like a bank, or buy some other asset the has positive cash flow. Taxes are here to stay-make as much money as you can and make as much of that money as you can tax free. Research self directed IRAs or maybe we can talk about different strategies one day.

@Mary Jay
I will let the CPAs and tax preparers answers the specifics of The entities you mentioned and the different tax returns as well as the pros and cons. 

I personally try to put all my new properties in HSAs, Roth IRAs or 401ks or CESAs to have the best tax situation possible -TAX FREE INCOME FOR LIFE!

@Mary Jay

There are trust tax brackets and they get high very quickly. https://www.thebalance.com/201... Or google irs tax brackets. It’s an eye opener.  Get with a cpa/attorney because trust type also plays a role in different ways to pay taxes. Revocable vs irrevocable etc 

@Daren Card
I applaud your thought process and your goals.  How many people in the family? What is the credit rating of each family member?  what are the family dynamics?  Who will do what tasks and how will each person be compensated? What are the tax brackets of each individual? Who and how many people will sign/guarantee the loan? How will decisions be made and what happens if there is disagreements? Who is in charge? Or is everything done by committee? Unanimous or simple majority? Etc  See if you can get everyone on board with the rules and that will become your operating agreement-do that and when you have it all agreed to and signed by everyone get your professionals involved  

I am the oldest of 12 children and it is tough to get everyone on the same page. As an alternative, Consider each person gets their own real estate and you work together for the common good. The seed  money (Parents home equity) is used as a loan/mortgage for the first property. That house gets refinanced and becomes a loan/mortgage for the second piece of RE and so on. 

@Sandra N. The above responses are very informative and useful, and I'd like to expand on them. Under certain circumstances, you are able to take a loan from a SDIRA; however, be aware of limitations and implications that, if not followed, will result in tax penalties. As @Clinton Rux touched on, a 60 day rollover will permit you to withdraw money from your SDIRA to serve as a personal loan as long as it is redeposited into a qualified retirement account within 60 days of the withdraw. Only one 60 day rollover is permitted per year, and if the money is not redeposited within 60 days, you will be responsible for any income taxes or early distribution penalties on those funds, so it is imperative that you fully understand the rule in order to avoid consequences. 

To reiterate the point made by @Michael Guay, the CARES Act put into place by the U.S. Government allows anyone with a qualifying employer plan such as a 401(k) or 403(b) who has been affected by the pandemic to take a penalty-free loan of up to $100,000 for things like personal, business, or educational expenses up until September 22, 2020. Any loans made after this date are subject to the prior maximum loan amount for a 401(k) plan of 50% of the account balance or $50,000. These loans must be repaid to the account in five years. Payments must be made in relatively equal amounts on a close-to quarterly basis. These repayments will not count toward annual contribution limits. Any unpaid amounts of this loan will be considered a distribution. All relevant taxes and penalties will apply. After a grace period of one missed payment, the total amount owed under the plan will be deemed distributed.

In either instance, making sure you are completing the proper due diligence and doing your research before making a loan from your retirement account will help ensure that you are following IRS guidelines and avoiding future penalties on your IRA. If you have any additional questions, I would be happy to connect.

It is the government’s way of trying to protect the public. If you have attorneys representing both buyer and seller with their clients best interest at heart there should be less scams and people being taken advantage of. If you don’t buy or sell RE everyday it would be hard to compete with someone who did. Just trying to level the playing field. The practice has some merit but as mentioned so many times in BP forums “experience and knowledge” is priceless. 

PPP loan must pay 75% in payroll so I don’t think PPP will work. 
However you can take a $100k Loan from your Ira/401k for 3 years and then pay it back giving yourself 3years of zero percent interest loan. I don’t recommend it because it Probably stunts your overall wealth building for those 3 years. 

@Stord Jacob
Government employees, police, teachers, paramedics, etc salaries are paid by those taxes. They need that money to live. Even if the municipalities get federal money I do believe they will continue with tax lien and deed auctions. Potentially postponed some because of the circumstances but not forgiven.