Example #1: Hard Money Loan
Client setups up IRA-LLC, which is funded by money in his self-directed IRA account. Investor need a loan to buy a property, so the IRA-LLC then wires money to the escrow account of the title company who is closing the deal. Investor signs a note and deed of trust, the latter of which is recorded against the property. The note and deed of trust designate the lender as the IRA-LLC. The IRA-LLC collects the monthly payments and deposits them into its bank account.
Example #2: Wholesale Deal
Client setups up IRA-LLC, which is funded by money in his self-directed IRA account with just $1,000. The IRA-LLC signs a purchase contract to buy a property at a below-market price. IRA-LLC signs a check from its own for the earnest money ($1,000). The IRA-LLC assigns its contract to a third party investor and collects a wholesale fee of $5,000, which it deposits into its account.
Example #3: Foreclosure Auction Purchase
Client setups up the IRA-LLC, which is funded by money in his self-directed IRA account. Client goes to his bank in the morning and gets a few $10,000 certified checks with money from the IRA-LLC account. Client goes to auction and wins a bid. The client gives the trustee the certified checks, then calls his bank to wire the rest of the balance from his IRA-LLC bank account to the trustee’s bank account. The deed is issued in the name of the IRA-LLC.
Example #4: Fix and Flip Partnership
Investors (who is unrelated to the client) signs a contract to purchase a bank owned property that needs fixing up. The investor needs a cash partner, so he approaches the client with a 50/50 partnership proposal. Property is purchased in the name of a holding LLC, which is owned 50% by Investor and 50% by the IRA-LLC. IRA-LLC funds the purchase by wiring money from its account to the title company. The IRA-LLC funds the rehab as well. The holding LLC sells the property and uses the funds it received to distribute profits to the investor and the IRA-LLC.
Example #5: Subject To Rental
Seller has a property he wants out of and is willing to deed over his property, “cash for keys”. Client setups up IRA-LLC, which is funded by money in his self-directed IRA account. IRA-LLC pays the seller $3,000 and takes a deed to the property in its name. The IRA-LLC then rents out the property, collecting rents and paying the underlying mortgage. Note that the rental income and profits on this deal are subject to unrelated debt-financed income (UDFI).