I was not for sure which Discussion Forums group I should go to for this question. So I will start here.
I have someone that would like to partner up and use her self directed IRA to Quick Turn some properties.
Of course we are both looking to make money.
Question 1. What or how would be the best way to set something up to where I make money?
2. How do we get money into her pockets instead of all going back to the Roth, or should I say get the ROTH to pay us??
Thank you for your help.
East Coast Girl
You need to get professional advice, not real estate message board advice.
Using a SDIRA is not too easy. If it’s her money and you have no beneficial interest in the money, then you have no concerns about it, or the profit that comes from it. If you have zero money and want to do a deal to put a few K in your pocket, you should learn about flipping. Read a few articles here, and maybe buy a book or two. A program for a few hundred dollars is good, but pricey. Don’t dive in head first. Do the homework, go to your local REI club, and talk to some people who have already done it. Flipping is the easiest way to get started. You’re likely to make a few thousand on your first few deals. After you get up to speed, you’ll move up the food chain and become a rehabber. Then you can expect to make 10-20K per deal. I consider flipping to be the ideal “baby-step.”
Word of caution: flipping is considered income. Don’t do a flip and then take your 2-5K and spend it. The IRS will want their cut. Ask a tax accountant for advice on how best to plan to for taxation.
Hi,
You have to be careful when using IRA money because 1 mistake and you could wind up with huge penalties from the IRS.
But in order to do a deal, here is the basic outline of the deal:
- Partner has a self-directed IRA that has funds in it.
- The IRA (not the person) can loan you money either secured by a property or just a promissory note. Based on how the loan is structured, you make payments to the IRA.
- You receive the money and do your deal and make a profit. You then pay the loan off and the IRA makes a profit.
At no time, can the person that owns the IRA receive income. Everything goes through the IRA.
This is limited advice. Seek out a professional to get the info you need. Visit http://www.trustetc.com
Patti Porter
There’s a company/guy here in town that does seminars about this very thing. He’s a good guy, too. PM me if you want his info.
BTW, there’s a great book I just finishged called “IRA Wealth, Revolutionary Strategies for Real Estate Investment” by Patrick W. Rice. Great reading - he lays everything out in “scenarios”, so it’s easy to understand.
-Anthony
I really appreicate everyones imput. This is a wonderful website!
East Coast Girl
Has anyone used a self directed IRA to buy preconstruction condos?
Going to a reia is in my opinion a waste of time unless you are going to sell a property or to find a mentor. For the most part reias are always trying to sell a product. If i want to buy a product i will go to the internet and come up with a variety products on the same topic. Then pick what i like. How many multi-millionaires go to a reia meeting every month. The only ones that proclaim to be millionaires are the ones hosting the seminars. If you are looking for products of subjects look on the net. If out of 30 people you should have at least 10 millionaires at your reia meetings regularly if you want to attend regularly.
Anyway i think an ira loans, must be repaid in one year. Thats from what i hear.
What do you do when IRA has very little $ in the beginning state, how do you do a deal ?
You have several ways with a self-directed IRA. You could lend the money out. For instance, there are some investors in mobile homes that I know. I lent them $5,000 to buy some homes and flip them. I charge them monthly principal plus interest. They pay my self-directed IRA directly.
You can also use your self-directed IRA to put an option on a property. You can use a $100 option to flip a property. The money goes directly into your IRA.
Patti Porter
Patti,
smart! what do you use to secure the 5K loan to them ?
The note is secured by the title of the mobile home.
You also have the option to do a unsecured note. But that is more risky for you.
Patti Porter
where do you find the forms for these types of transactions ? is it different per state ?
thanks Patti.
The promissory note is a standard form that you can get from any attorney or on-line. All the other forms and how to do it are outlined by the company you are using for your self-directed IRA. I use Equity Trust at:
http://www.trustetc.com
Patti