Self Directed IRA Questions and Answers

Q. I am purchasing property with my IRA that will generate rental income. Where does the rental income go?

A. All income generated by a property owned by your IRA must return to your IRA, in order to retain the tax deferred status of the investment.

Q. I don't have enough money in my IRA to purchase the property. Can I purchase real estate via IRA using debt financing?

A. Yes. Financing with a lender through your IRA is allowed. There are specific rules and it does create issues for some lenders.

Q. May I have a company that I own fix up the property that I have in my IRA?

A. No. The IRS code and regulations on prohibited transactions prohibits such an activity by an owner. You may not provide a service and receive a benefit from your plan or account. This is considered "self dealing" and is a prohibited transaction.

Q. Does the Required Minimum Distribution (RMD) apply to Self-Directed IRAs?

A. Yes. Minimum distributions are required of ALL retirement accounts each year. RMD begins when the participant reaches age 70.

Q. When I sell a property owned by my IRA, may I keep a portion and send the remaining portion to my plan administrator?

A. No. All income generated from the sale of a property owned by your IRA must return directly to your IRA.

Q. Can my IRA purchase real estate that I own presently?

A. No. That would be a prohibited transaction. You may not purchase a property or interest in a property which is presently owned by a disqualified person (yourself and your family members of linear descent).

Q. Can I transfer/rollover funds from an existing IRA, 401(k), or 403 (b) to a self directed IRA for the purpose of investing in real estate?

A. Yes. You can choose to transfer/rollover all, or portions of, your existing retirement accounts to Southern Financial Services in order to self direct them into real estate investments.

Q. What type of real estate can I buy with my IRA?

A. Any type as long as it is for investment purposes.