All Forum Posts by: Christian Sifuentes

Technically your 10% down payment with personal funds disqualifies that property. If you can "unwind" that transaction, rewrite the P&S agreement in the name of your IRA and then have the earnest money sent from your SDIRA, it could work.

Will your SDIRA have enough funds to purchase the property outright? If the IRA needs financing, keep in mind you'll need to use a non-recourse loan (NRL). Using an NRL to finance an IRA purchase of RE will trigger a tax called UBIT on the portion of the rental income attributable to the financing. Rough example: your IRA puts down 75% and finances 25% of the purchase. Roughly 25% of the net income, after deductions, will be subject to UBIT tax, which must be paid by your IRA.

Most NRLs are 3 - 5 year ARMS, and most lenders require 30%, 40% or more down. They'll also want to see a cash reserve in the IRA to cover any loss of rental income. They'll generally lend on income producing properties only - no raw land, etc. Each has their own specific requirements and exclusions.

If your IRA will be using financing, be sure to check with a qualified CPA before proceeding so that you're aware of the impact UBIT may or may not have on your ROI.