One section of the Professional Real Estate Investor class curriculum contains the concepts of using other people’s money (OPM). One of the greatest resources we have found for OPM is Self Directed IRA’s.
In this article we are going to look at some basic guidelines for lending money out of a SD IRA. This is important information whether you are the borrower or the lender.
First of all, money in a SD IRA can be loaned out to any person who is not a “disqualified person.” A disqualified person is defined as:
Individuals or entities between whom or which an IRA is prohibited (absent a special exception) from engaging in any direct or indirect sale or exchange or leasing of any property; lending of money or other extension of credit; furnishing goods, services or facilities; or transferring to or permitting the use of IRA income or assets.
Fiduciaries (which in the case of a self-directed IRA includes you, as the IRA owner);
The following family members of the IRA owner:
Spouse
Parents
Grandparents and Great-Grandparents
Children (and their spouses)
Grandchildren and Great-Grandchildren (and their spouses)
[NOTE: The term “disqualified person” under the Internal Revenue Code does not include siblings (brothers and sisters) or aunts, uncles and cousins of the IRA owner. Definition provided by Equity Trust Company.]
A loan made out of a SD IRA can be unsecured but… Continue Reading
