Self Directed IRA's And Personal Liability
I have my self directed IRA set up and I am ready to invest in RE. I plan to buy fixer-upper properties, rehab them and then resell them. To stay in line with the IRS rules associated with self directed IRA’s I will not “manage” the process. Instead I will “self direct” by selecting the property, contractors, attorneys, title companies etc. etc. and directing the custodian to engage the various parties. My question concerns personal liability. While my name does not appear on any of the documents (other than IRA for the benefit of “my name”) it is clear that I am selecting the various parties and “directing” the process. Can I be held personally liable if anything goes wrong. If so can I avoid this situation? One thought I’ve had is that my IRA could form an LLC as the 100% stakeholder and I could be the manager of the LLC. However, I think the IRS might not view this favorably claiming that I would still be actively managing the IRA funds in contravention of IRA rules. Does anyone have any experience with this issue and, if so, could they suggest an arrangement that solves the liability issue and satisfies the IRS at the same time? BTW I would like to avoid hiring an unrelated manager to run the LLC.
I am also interested in this. I do not have enough in a IRA to buy properties out right but if I start an LLC and add other funds to it (heloc) + %0 cc balance transfers I should have enough $$ in the LC to buy properties all Cash and flip them. I IRA would get its protion of the profit.
I am also interested in this. I do not have enough in a IRA to buy properties out right but if I start an LLC and add other funds to it (heloc) + %0 cc balance transfers I should have enough $$ in the LC to buy properties all Cash and flip them. I IRA would get its protion of the profit.
You can manage the transaction. However, you do not want to form an LLC for your IRA. You cannot direct a business from your IRA, and doing more than six houses with your IRA a year would be considered a business. As long as you manage a house rehab and do not get a profit from it, it is okay. If you want to make some money without these issues, consider lending your IRA out to another investor and a good interest rate. I just cleared 19% on a deal I did for another investor with mine.
Go make some.
You can partner with your IRA. Form an LLC that has you personally as a percentage partner and your IRA as the other percentage partner. You can manage the LLC.
Brenda