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You need a Self-Directed custodian that is regulated by the government.IBC Trust will be your custodian. |
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Liquidate your 401(k) or IRA and transfer to the Self-directed IRA. Check should be payable to "IBC Trust, custodian FBO your name IRA" |
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Directly into property with your IRA |
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As a co-partner with friends and family |
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As a member of an LLC or "C" corp. |
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As a lender on a trust deed |
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As an IRA borrower with leverage |
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As a partner in a joint venture |
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What is accepted real estate property by the IRS |
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What is non-accepted real estate property by the IRS? |
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What is a prohibited transaction |
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What is a disqualified person |
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| The mortgage must be a non-recourse loan. |
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You cannot guarantee a loan for any amount. In the case of an LLC, the operation agreement must state there is no additional capital requirement for the plan |
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If there is any deficiency, you cannot deposit your own money to the plan bank account. There are only two ways to handle the deficiency:
a. From your annual contribution to the IRA
b. The bank has to liquidate your real estate to get "paid off" |
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Therefore, careful planning of the rental income and expenses is very important. The bank usually will request more money in the escrow account. |
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There is a requirement to file form 990T with the Internal Revenue Service on or before the April 15. This is called UBTI - Unrelated Business Taxable
Income because of debt financing. For LLC or LP, usually your investment sponsor will prepare 990T-k1 for your account. |
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| The trust will receive all rental deposits and pay all expenses through the plan account. It cannot be handled through you. |
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Rental income checks should be addressed to "IBC Trust, custodian FBO your name IRA" |
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Repetitive expenses such as loan payments, insurance, taxes, utilities, etc. should be set up for automatic monthly payments to IBC Trust. |
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For extra expenses such as repairs, forward the invoice to IBC Trust, and IBC Trust will pay the bill. |
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Appraisal is required every 3 to 5 years. |
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You can hire a third party manager, but not a disqualified person. |
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