Can be done. Takes some steps and the complexity of creating an entity (ie a tax and legal entity) sufficiently non-related that a self-directed IRA can loan funds to (or buy paper from).
It's well established and clearly meets tax scrutiny if done right. Roll over the IRA funds into a true self-directed account. Tax code only prohibits coins, collectibles, paintings, etc for IRA holdings, so Real Estate can be structured to meet the criteria by using Paper. As the note holder (mortgagee) the self-directed IRA is tested and true.
But a self-directed account can also loan to (ie hold a note from) any properly structured entity (trust, corporation, etc), and the entity is free from the normal IRA restrictions.
Not to be done on your home computer, however. Get a knowledgeable tax attorney to be sure the structures are above board and will withstand audit.(As they say, all tax strategies work as long as you never get audited.) I say plan to get audited and don't try to save a few bucks with a do-it-yourself cheapie deal.
One source of self-directed IRA's is Mid Ohio Securities. Another is Lincoln Trust. Real Estate investors have used these guys for 20-30 years with great success and results. Whenever I do a deal with a big upside potential, it's in my self-directed IRA, or an entity that compensates the IRA account in a suitable manner. It's deductible to the entity, deferred for the IRA, and up to 100% of the gain gets put into the next deal(s). Compounding works so much better that way, ya know.
Word of caution: until you've got a real good track record of success, or unless you've got beaucoup $$, don't eat your (IRA) seed corn learning about loosing 'put' strategies. Do that with spare cash.
LOL
Bob |
