All Forum Posts by: Loren Whitney

Rav Ram All of your logic is correct. Using a loan with a specified rate of return will help you avoid UBIT. If you begin splitting profits, the income will be treated as operating income instead.

I disagree with the negative mentions so far. It's just a different way of going about things. Besides, you've already put this money aside in a tax advantaged account over the years. Technology has changed over time to make the accounting nuances of SDIRA investing more simplistic. Like others have said, it's the IRA that must pay expenses and receive income for its portion. Things like online bill pay and even online rent payments (ACH) are available to streamline these tasks. The mention of requiring a property manager is false. IRA holders CAN be a property manager but only from a decision making standpoint. You should not perform any sweat equity, nor should you handle cash flow. Imagine trying to landlord remotely. Check out the blog article I wrote on this about a month ago. It's easy for someone to say, you lose all the personal tax advantages but everyone's tax situation is different. The lower your tax bracket, the less productive those benefits become. I'm working on a side-by-side comparison blog right now to show a real comparison with what I consider to be a middle of the road American (25% tax bracket). I don't think ALL of those who weight in on the (lose personal deductions) argument have ever understood how to accurately calculate the comparison. It's a long term comparison, not a short term one.

This is really just a comparative math equation. Once you distribute the retirement funds, that's it, you have a taxable event. On the flip side, those funds can result in tax benefits via mortgage expenses, depreciation, etc. Calculate out this benefit over the life of the investment. You'll obviously have to take your personal taxes into account. Now look at the option to simply purchase the same property with the tax advantages of an IRA or solo(k). You maintain the tax-deferred status and only pay taxes on the funds you withdraw. If you take the time to do the math, you'll probably find that keeping the funds taxed deferred yields the most tax benefit.

This is really just a cimpative math equation

That's correct. The initial funding and subsequent fundings are two different scenarios. Thanks Phil

Welcome to BP!

I'm exciting for you guys. I'm out of the office until Monday but if either of you would like to have a discussion then I'll be happy to answer questions. Your IRA can obtain a "non-recourse" mortgage to leverage your plan assets. The mortgage must non-recourse because you're restricted from personally guaranteeing the note. The only collateral is the property itself. You'll find that non-recourse lenders will ask for 30-40% down with some additional reserve requirements. I have a list of non-recourse lenders that our clients have used across the country. Send me a PM if you'd like me to forward it on. Feel free to ask follow up questions.

You can always transfer your existing IRA funds without restriction. Your 401(k) with the employer is different. If you're under 59.5, find out if they allow in-service distributions. They will determine if you're 'allowed' with withdraw from the plan while still participating. I'm out of the office until Monday but I'm happy to answer more questions then if you like.

Good Talking with you today David! I look forward to speaking agin.

How did you find out about SDIRA investing Pawan?

There are several considerations to take into account. Can you tell us more about your strategy and goals?

There are stuctures that use an LLC for checkbook control but an LLC is not required.

If you're self-employed without employees, you may also qualify for an Individual 401k plan.

There are several lenders that offer non-recourse loans. NASB is one of the largest national lenders but there are others. It's also common for small regional banks and credit unions to offer non-recourse financing options.