All Forum Posts by: Brian Eastman

@Ari Newman

It sound like you need to have a conversation with your plan provider or consult with a licensed CPA or tax attorney.

An entity would be disqualified to your IRA if you or a disqualified person controls greater than 49%. The GP is unrelated to you and is not a disqualified person simply by the fact they control an entity your IRA has invested into.

My IRA could be a 10% partner in an entity 90% owned by someone else, so long as that someone else is not me, my spouse, lineal family, or a fiduciary to my plan.

@Ari Newman

Based on what you describe, your investment in deal A with a specific general partner should not make them a disqualified party to your IRA. There should be no issue with your IRA, your wife's IRA, or you personally making a separate, unrelated investment in a different opportunity with that sponsor.

@Avril Ann

Speak with your plan provider and get a better understanding of your banking structure.  You have what you need, you just need to learn how to use it.

@Mark Sheppard

If by "work 401k" you are speaking about a 401(k) with your current employer, it is likely stuck there. If you are referring to a 401(k) from previous employment then you can move that to a self-directed IRA or Solo 401(k), depending on your situation.

With such a plan, it is not "you buying more real estate". Rather, the plan is acquiring real estate as a means to diversify the plan's holdings and better protect and grow your tax-sheltered retirement savings. Any plan investment must be made exclusively for the benefit of the plan and may not intersect with you or personal finances. You can control the investments and be a fund manager for your IRA.

Plans that offer checkbook control will be much better than hiring a 3rd party custodian to process transactions on your behalf.

@Damon L. Davis

The HML simply does not know what they are doing.

The LLC is the borrower. You as the manager can execute the affairs of the LLC. If you were to ask the custodian to sign, they would not. They have no role over the day-to-day operations of the LLC. They simply documented that the IRA has invested into the LLC.

@Bill Pollnow

Bring your CPA into the discussion and they will show you where the flaw is.

Income from the LLC passes through to the corporation. Paying corporate tax on rental income is certainly something you can do, but it is not an optimal approach.

To simplify, running a services business works in a ROBS. Holding passive assets can technically be done with proper structuring, but it is a poorly conceived strategy.

@Bill Pollnow

Sometimes there are solutions that are possible, but make no sense.

Property management is a services business.  That service could be capitalized with a ROBS plan.  It would be recommended that you provide property management to others besides yourself.

To place additional capital into that services business to acquire passive rentals would be foolish.  Why would you put passive rentals in a C-Corporation?

@Bill Pollnow

The ROBS program is valid and has been in use since the 1980's.  You definitely want to work with a qualified provider that knows what they are doing, not a 1-man attorney operation.

The ROBS structure is entirely different from an IRA. There are a few restrictions designed to keep you from pirating your retirement plan personally, but you can invest retirement funds into your own business without taxes or penalties. The normal rules you see about arm's length investing with an IRA to not apply. This is not an IRA.

The underlying business does need to be an active enterprise that creates trade or business income, such as real estate development, frequent flipping, or operating a hotel or self-storage business.  This tool will not work for passive investment holdings like rentals.

@Danny Cox

Multiple vacation rental properties could be done with a ROBS.  That is a services business.

A real estate operating company concept will not work.  Well, technically yes, but it makes zero sense and no reputable provider would setup such a structure.  You might require $20K or so to setup the property management side of things, but would not want to purchase and hold rental properties in a c-corporation, which is what is required to align with the ROBS structure.

@Danny Cox

A ROBS plan is not suitable for holding passive income properties.  That program only works for an active business, which might include real estate development, flipping, or running a hotel.

You could establish a self-directed IRA or Solo 401(k), but that would mean all income produced goes back to the plan. It is not entirely clear, but it seems your intent is to produce spendable income today. If so, that simply is not possible within an IRA or 401(k) unless you are over age 59 1/2.

If you want to use that capital to hold rentals and be able to draw the income personally, you would need to take a taxable distribution.  Speak with your CPA and listen to the dozen or so reasons they will tell you not to do that.