Last week I hit on the ability to use your self-directed IRA to purchase real estate. This week I will hit on leveraging your SDIRA to purchase rental property. Because of IRS provisions that do not allow you to personally benefit from an investment within your IRA, obtaining debt with your SDIRA with a personal guarantee is not allowed. As such, an IRA or self-directed 401k must obtain a non-recourse mortgage. A non-recourse loan is (in this case) a loan made to an IRA (not you individually), and it’s based solely on the value of the property acquired with that debt, not the credit of the individual who is the beneficiary of the IRA. Essentially, the property is qualifying for the loan without a personal guarantee. Because of the lack of personal guarantee, banks typically will not touch this, which is why this type of non-recourse loan is not widely available in the marketplace. However, if you are interested, we do have contacts that will write this type of loan.
For all the reasons leverage is utilized to purchase real estate would be the same reasons to leverage real estate within your IRA. If you have a company 401(k) that matches, by all means, utilize that. If you do not or you want an additional retirement that gives you more control over your investments, by all means, look into opening an SDIRA. I have one that I do private lending out of, flip houses and own long-term buy and hold. Need help setting up a Self-directed IRA? We can set you up with the company that we use. Simply set up a call to get started.
