Part 1 of this article explained how the self-directed IRA works with real estate.
As you know from that article, the self-directed IRA for real estate faces a wall of regulations. And from a practical standpoint, putting real estate in an IRA for the do-it-yourself individual does not work well.
Part 1 covered several drawbacks that arise when you place real estate in a self-directed IRA. Here we explain three more potential problem areas that you need to consider if you want to put real estate in a self-directed IRA:
1.
Debt financing
2.
Unrelated business income tax
3.
Problems with RMDs
Debt Financing
One of the great advantages of owning real estate is leverage: you ordinarily can borrow a substantial portion of the purchase price.
Your self-directed IRAs also can borrow money to purchase real estate, but it is more difficult than a normal real estate transaction.
Neither the self-directed IRA owner nor any other disqualified person may lend money to the self-directed IRA or personally guarantee a real estate ... Log in to view full article.
