MyDirect IRA is an industry leader in Self-Directed IRA LLCs by keeping our company focused on you—our client.
We truly believe that if you are successful, we will be as well. One way we ensure our clients’success is by having an in-depth understanding of how our clients intend to invest their IRA funds. MyDirect IRA’s compliance standards are the highest in our industry. Each client transaction goes through four levels of compliance. We spare no expense in ensuring our clientscan invest safely, with peace of mind.

Is this a new concept? Why don’t more people know about this?
This is not a new concept. For years, private companies have been able to utilize retirement funds as a source of business capital. Most financial advisors and stock brokers, however, are not made aware of these options because these investments do not provide a sufficient profit for their institutions. Investment firms and stock brokerages do not want clients to move their funds outside of their companies where they would no longer be able to draw a percentage of your income.

Are there going to be taxes and penalties when I move my IRA into the Self-Directed IRA LLC?
Absolutely not! You are not taking money out of your IRA; Rather, you are investing it in another way. You are investing in the LLC and then the LLC is investing in Real Estate.

What types of accounts can I move into the Self-Directed IRA LLC?
One of the many benefits of an IRA LLC is the ability to pool funds. Here are just a few account types you’re able to move:

  • 401K
  • IRA
  • Sep IRA
  • Simple IRA
  • Roth IRA
  • 403B

Can I be the property manager for real estate held by myself-directed IRA?
If you have a “traditional” self-directed IRAthenthe answer is no. Using an MyDirect IRA Self-Directed IRA LLC, you can manage theproperty, collect the rent, screen tenants, perform general maintenance, and more. This can save your IRA hundreds of dollars eachmonth and ultimately provide more investmentcapital for ongoing investments.

Can I mix personal funds with IRA funds to purchase a piece ofreal property?
Yes, if it is structured correctly. The prohibited transactions code prevents an individual from usingpersonal or IRA cash to benefit the other. This can be easily violated through “formation issues.” If youare considering using your personal funds to invest in real estate with your IRA either through Tenant-in-Common or a Partnership Entity, consult with MyDirect IRA first. Do not be a test case for an inexperienced professional.

What is meant by “checkbook control?”
Checkbook control means that YOU are the signer of the checks. You have the ability to make the investment decision, sign the contract and then write the check for the investment. You are truly in control.

Is it legal to purchase non-standard assets such as real estate by usingmy IRA?
Without question! The Employee Retirement Income Security Act of 1974 (otherwise known as ERISA) essentially passed the responsibility of retirement saving from the employer to the employee. IRAs were created in 1975 to provide individuals a chance to direct where their retirement funds were invested. Rather than delineating which investments are allowed, the IRS code instead identifies whichinvestments are not permitted under these laws. There are only two types of investments excludedunder both ERISA and IRS Codes: Life Insurance Contracts and Collectibles (such as works of art, rugs, jewelry, etc). Refer to Internal Revenue Code Section 401 (IRC § 408(a) (3)) for more information.

Can my IRA buy real estate that I currently own?
Even though there are companies which claim you can, this is strictly forbidden under IRC § 4975.There are many great real estate transactions available, so do not put your retirement account at risk by engaging in a “self-dealing” transaction such as this.

Can I get a loan for property owned by my Self-Directed IRA LLC?
Yes. You will need to get a non-recourse type of loan. However, when you receive a loan unrelated debt financing income tax will apply.
If my brother is not a disqualified party, can I buy a house and let himrent it from me? Theoretically, yes. Your brother is not a disqualified person. However if he occupied a rental property owned by your IRA and could not make the payments, you could run afoul of the exclusive benefit rule.This could cause your IRA to have participated in a prohibited transaction. It is important that you treatevery investment the same, to benefit your IRA and only the IRA.

What are Prohibited Transactions?
An understanding of prohibited transactions is very important. The IRS defines a prohibited transaction as follows: “Generally a prohibited transaction is any improper use of your IRA account or annuity by you, your beneficiary or any disqualified person. Disqualified persons include your fiduciary andmembers or your family (spouse, ancestor, linear descendant, and any spouse of linear descendant).”IRS Publication 590 IRC 4975 is the section that lays out the rules on prohibited transactions. Prohibited transactions generally involve one of the following: (1) doing business with a disqualified person; (2) benefitingsomeone other than the IRA; (3) loaning money to a disqualified person; or (4) investing in aprohibited investment. You need to make sure that it is your IRA that benefits from a transaction rather than you personally. Beware of any “self-dealing” transactions.

How do I know if the Self-Directed IRA LLC is right for me?
Are you tired of having your investments restricted to stocks, bonds and mutual funds? Are you ready to invest in real estate or real estate related investments? Do you want checkbook control? Are you ready for better returns than you’ve been getting? Are you ready to see your retirement increase to thepoint where you can retire? Are you ready to be in control? If the answer to any of these questions is yes, you are ready for the Self-Directed IRA LLC.

Are there any Prohibited Investments?
The Internal Revenue Code outlines the following types of investments as not allowed:

  • Artwork
  • Rugs
  • Antiques
  • Metals
  • Gems
  • Stamps
  • Coins
  • Beverages
  • Stock in a S-Corporation
  • Other tangible per

Can I use leverage to buy real estate?
Yes! Leverage is a very powerful tool when purchasing real estate. However, there are unique requirements when using a self-directed IRA and leverage. The “prohibited transaction” rules state that you—as a disqualified person—cannot extend credit to an IRA or IRA asset. This means that if your IRA gets a loan on a piece of real estate, you cannot personally guarantee the loan. This would be viewed as extending credit. Refer to IRC § 4975(c) (1) (B) for more specific information.

An IRA must secure what is called a non-recourse loan. This type of loan is given solely based on the property. A bank who lends money this way is lending money based on the investment rather thanlending to a borrower who has a great credit score. Because banks do not have any recourse against the IRA or IRA holder, they typically require a high down payment. In the past we have seen banks require 50% down with marginally high interest rates. Banks are not in the business of foreclosing on homes, so they need to make sure if your self-directed IRA cannot make the payments, the IRA is in aprotected position and will not lose its investment. To rectify this possible scenario, MyDirect IRA has built a working relationship with a national banking institution which will require as little as 30% down withvery reasonable interest rates for non-recourse loans in all 50 states.

Interested in how you can safely invest your retirement funds into potentially more secure and more lucrative investments? Contact an MyDirect IRA representative today to learn how you can leverage your retirement potential.

Get started today! Call 800.215.2120
This information contained herein is intended for educational purposes only and should NOT be relied on as legal or tax advice. Nothing herein constitutes the establishment of an attorney-client or accountant-client relationship between you and any person involved in preparing the materials herein. This post cannot and does not address the unique facts and circumstances of your specific situation and should not be relied on for your particular transaction. MyDirect IRA makes no claims, promises or guarantees as to the accuracy, completeness or adequacy of any information contained in this post. Accordingly, you should always contact a qualified tax attorney or advisor prior to making any financial decisions.