Long time fat wallet member here and haven’t returned here in a long time as I almost forgot about it.
Great to see folks continuing to engage here …
Anyway, what is the general FWF/FD wisdom around doing real estate investing with Self Directed IRAs
Anyone here ventured into Non recourse loans or created an LLC to create a “Checkbook IRA”?
I am in California if that matters
Thanks in advance!
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Do you have a good reason for doing this or are you just reading the pitches from the handful of firms that hawk this stuff? I mean, you lose a lot of the natural tax breaks that RE gets currently if held personally in a taxable way (depreciation, 1031 exchanges, step up on death, etc, TBD on Biden’s tax plan which would hurt several of these), and you end up paying higher mortgage rates and more hassles if you want to finance the property. Plus you pay some fees for the privilege for whoever sets up the SD IRA.
The main reason was having instant access to cash to finance investment deals that is not subject to bank scrutiny, allows to move faster when needed and I imagine won’t get reflected on personal credit and DTI
I looked into RocketDollar … they setup an LLC in Colorado automatically … for Checkout IRA as a California resident you also have to set up LLC in California (800/yr. to the state+ setup fees?) and notify California about the out of state llc ($70)
Another site I have found is IRAresources.com
These aren’t for most people. For example, per the IRS rules, you are not allowed to contribute any labor to the company. This is to prevent people from “working” for their IRA and earning money tax free.
So for example, you cannot do taxes or accounting yourself, you have to pay someone to do that. You cannot do maintenance or repairs yourself, you have to pay someone to do them.
There is a lot of red tape which greatly reduces profitability. That is why it is not common.