On Nov 28, 12:57 pm, TB <bore...[at]pacbell.net> wrote:
- quote -

Im guessing Guidant is that company you are looking to open that Self
Directed with. Before you Invest, I completely agree with Tad,
understand that your mortage is not your only problem. If you deplete
your assets in your IRA for the the real estate, you won't have any
valuated assets in there to use if additional monies are needed. Just
take the 10K for the primary residence out of the IRA and leave the
self directed IRA's alone. I believe the only value in the "truly self
directed" accounts lies in the I401k opportunities that allow for
small business to use assets to build their company in various ways.


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted.

When people refer to owning real estate in their IRA, they are usually
referring to real estate investment trusts (REITs). As Tad mentioned,
there are at least a half dozen drawbacks (and some potential huge
threats) to owning actual real estate in you IRA. In addition to his
great advice, there are a very limited (and obscure) number of
cutodians that actually allow this and even fewer banks that will loan
money to an IRA.

I would be hesitant about this for all but the very experienced in
investing, commercial real estate, and taxation (I have just ruled
myself out also).

Bill Woessner wrote:
- quote -


These IRA/real estate deals get talked about in the press much more than
they should, it's a pretty unusual scenario where it will work. It's
difficult to follow the rules about IRAs while owning real estate, so
you run the risk of disqualifying your IRA. Borrowing money is a big
problem, you'd generate what's called "UBTI", unrelated business taxable
income. So that in itself sounds like a deal-killer for you. And given
that you lack the IRA funds to buy outright, what happens when the
property needs a roof, or other expensive maintenance - how to pay for
it? You can't add money to your IRA, and you can't loan money to your
IRA. So IRA ownership raises some practical cash flow problems.

Plus, rental real estate has many tax advantages associated with it,
that you give up by owning it in an IRA. Self-help legal publisher Nolo
Press has a very good book about rental property taxation and record
keeping (www.nolo.com), it's good reference if you do pursue real estate
investment in the normal way (non-IRA).

Given that you haven't owned real estate in the past, this is adding
another (significant) risk factor.

As for buying into the beginning of the bubble-pop...separate topic!

-Tad

My wife and I are considering a somewhat unique real estate investment
opportunity. I've heard that it's possible to purchase investment
property inside a self-directed IRA. Since this would be purely an
investment property, I think this might be a good approach for us.
However, I have no idea how the mechanics of such a transaction would
work. Does anyone here have experience with these self-directed IRAs?

There are a whole host of complications, as well, which will probably
make this much more difficult. For example, we don't have enough
money in our IRAs to purchase the property outright. So is it
possible to get a mortgage for a property purchased inside a self-
directed IRA? Also, can we somehow combine money from our 3 IRAs (I
have a traditional and a Roth; she has just a Roth) to purchase the
property? These are just 2 issues that I thought of off the top of my
head.

If push comes to shove, we'll just forego the self-directed IRA idea.
I thought it would be nice, but since this is our first real foray in
to real estate investing, it might be better to just keep it simple.

Thanks in advance,
Bill