Write mortgage in IRA?

[pb4uski]

DD is in the process of moving closer to home and buying a condo. She has a good paying stable job, excellent credit and is excellent with her money.

I'm toying with the idea of being the lender for her mortgage but it would be more tax efficient for me to have my IRA be the lender since I hold my fixed income investments in my tax-deferred accounts.

Does anyone know if this is possible (for my IRA to make the mortgage loan to DD) and if so, how to go about doing so?

 

[Brat]

No, it is not possible. I looked at that some time ago myself and found that it wouldn't work. Some small pension plans can invest in rental property but not IRAs.

 

[karluk]

I don't think this will work, if for no other reason than you are planning on loaning money to a family member. Take a look at the following article, which describes the slightly different, but related issue of buying rental property in an IRA. It seems fairly clear that the rules disallow making an investment that will directly benefit you or a member of your family.

You may only buy a property that neither you, nor your businesses, ever use. In fact, you can’t rent the property to any related parties either — family members, businesses owned by your business, and so on. Luscombe says to be very careful about this. If at any time in the life of the self-directed account, you rent to a related party, the retirement account will lose its tax-exempt status.

http://www.marketwatch.com/story/ho...y/how-to-buy-real-estate-in-an-ira-2013-04-02

 

[LOL!]

You've been reading the WSJ about private mortgages?
http://online.wsj.com/articles/is-a-private-mortgage-right-for-you-1414888149

 

[pb4uski]

Researching it more, I think you are right - I could use a self-directed IRA to write a mortgage at market rates to a stranger but not to DD. Silly but that's the way it is.

 

[Wrirya]

You actually can do the loan BUT
Your Ira or 401k needs to be in a self directed account. Most employers don't offer that so you may need to transfer all or some of the money into an account like this. There are many different self directed administrators if you google search you will find them.


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[Wrirya]

Sorry yes I forgot to mention it has to be "arms" length transaction. Meaning it has can't be family. Keep in mind typically these private loans market rate is higher than standard loans.


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[RetireAge50]

Are you sure you would want to lock in a low rate for a long period? Also may change your relationship with her (or at least add a new dimension).

You seem to have your head on straight so probably would be fine if it turns out possible.


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