Using an IRA to invest in Investment Properties
Has anyone done this? Supposedly it's very straightforward and although there are some hoops and hurdles you need to jump through, it could be a very interesting play to invest a portion of an IRA into some hard assets rather than equities. Trying to hear experiences of anyone who has done so. Thanks!
I have a self directed IRA that is both invested in RE as well as in PE funds. The RE that I bought into was a land banking deal with an estimated 4 year hold. I know one of the other investors in the deal also did their investment through an IRA. He has a specialty company handling his, mine is through Schwab.
How was the process for converting your IRA/401k to a Self-directed? What were the expenses and/or additional terms you needed to comply to to be involved via IRA? Is there any downside? I am looking at possible doing this with a portion of my IRA but wasn't sure if there was some issue that wouldn't allow me to do so either in terms of very specific debt financing that they allow or anything else that may come up later in diligence...
It was pretty simple to convert. I have a 401k with Schwab and all I had to do was open the account and roll in the funds.
I don't pay any fees except for a 25 wire fee for each investment (I have other accounts with them as well so my balances get me free stuff).
You just have to submit the subscription documents from the investment and they take a quick look and then wire out the money. It is pretty seamless.
Not sure if you can leverage a deal inside of your IRA (my initial reaction is that you can't because your IRA can't pledge assets to a bank), but something to talk to your financial advisor about. My deal is a syndication and not leveraged
Awesome - but wait, so the deal you syndicated wasn't levered at all? It was an all-cash land purchase? Was there any capex or ongoing capital calls required to be funded? From what I know, you can only pay for improvements, etc. for your portion of the investment out of the IRA itself and not through personal funds. I assume all distributions are sent back into the IRA as well.
Yea, no leverage. We are estimated to make 20-25% IRR as we sell back the lots over the hold. There are some future capital expenses (fencing, well drilling, roads, power lines) which will all be funded out of my IRA as well. In round numbers it was 70% upfront with the remaining 30% future funded.
Syndication is a total of 5 people and are other family members/friends. This is just parking some cash for all of us, don't need the leverage.
Pretty easy to self-direct your IRA. The company I use is called Midland IRA I think they are out of Florida.
I've heard there were a lot of restrictions that you cannot invest in many types of deals/properties out of an IRA..but wanted to find more information on exactly how that worked.
Eaque magnam nemo animi sit quae. Quis inventore ut est enim ipsum. Ad eligendi amet corporis. Esse velit ad sed eum nisi ipsa. Qui quasi omnis voluptatem ut. Veritatis modi asperiores tempore voluptatibus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...