Among the numerous benefits of opening a Self-Directed IRA — which have been talked about at length in our blogs — these retirement funds also allow you to partner your IRA with other entities, raising the amount needed to buy or invest anything from a single and multi-family housing to commercial property. Partnering your Self-Directed IRA funds together is an excellent way to purchase a property, mitigate risk, and make larger investments even if you have limited funds. Keep reading for partnering strategies that will help you reach your real estate goals. For any extra inquiries about Self-Directed IRAs, or more information about our IRA non-recourse loans, don’t hesitate to reach out to a lender at First Western Federal Savings Bank. We look forward to hearing from you!

Partner With Another IRA

Your Self-Directed IRA can be partnered with any other IRA to purchase a property. The partnered IRAs then divide the rental income and expenses, according to their percentage of ownership. If you have invested in real estate using your Self-Directed IRA, then you are likely all-to-family with the concept of disqualified persons. These are relatives or entities that are barred from doing business with your IRA’s real estate. Disqualified persons include parents, grandparents fiduciaries and plan service providers, your spouse, children, grandchildren, and even great-grandchildren (as well as their spouses).  

Your Self-Directed IRA can partner with anyone at the time of initial purchase — even a disqualified person — meaning that when you make the initial purchase, you may partner with your spouse, a parent, or one of your children. This may sound a bit confusing, but remember that this can only be done at the time of the initial purchase, and no subsequent business can be conducted with a disqualified person beyond the initial purchase. For example, you may partner with your son’s IRA to purchase a property, but you cannot hire his construction firm to build on it. 

Partner Your IRA Funds With Your Personal Funds or Non-IRA Funds

Not all the funds used to buy the property have to come from a tax-advantaged retirement savings account. Partnering your Self-Directed IRA funds with personal funds creates personal income for you today and retirement income for your future. You will be taxed on the personal income earned by the asset, but your IRA’s earnings are sheltered from being taxed. It is important to note that tax is only deferred with a Traditional IRA, and you won’t have to pay any tax on any contributions until you take distributions in retirement. Roth IRAs, on the other hand, offer tax-free distributions in retirement because your contributions are made after tax.

Just like we mentioned above, you could partner with a disqualified person for the initial purchase, like a child or parent, but cannot collaborate with them after this.

Partner With Multiple Parties

In addition to having the opportunity to be paired with other IRA funds and personal funds, your IRA can pool funds to invest with multiple investors. You can partner your IRA with your personal funds, a friend’s personal funds, and also with another friend’s IRA. This can be especially helpful for larger real estate investments that you cannot do on your own. There are no limits to the number of entities that may be involved in the purchase, but most financial advisors will tell you to keep it to a manageable number. If you decide to go this route, it is a good idea to consult a financial advisor. 

Why Partner Your IRA Funds At All?

Partnering your IRA funds helps mitigate investment risk and reduce each investor’s costs, but there are even more benefits that you can consider when doing so. When pairing your Self-Directed IRA with other IRAs or other funds, you can invest with limited funds and still build your capital in your IRA. Alternative assets like real estate and private equity can produce income at a faster pace than some traditional assets, like bonds and mutual funds. 

Furthermore, you have the freedom to invest in more lucrative assets when you pool investment funds. You capitalize on the opportunity of increasing the buying power that you may not have on your own or in your IRA and thus are able to enjoy larger returns they wouldn’t see otherwise. 

Get Started With Our Lenders Today

Partnering your Self-Directed IRA funds opens up a world of opportunities for you and other stakeholders involved. Plus, when you open a Self-Directed IRA, you are also able to use it in tandem with a non-recourse loan, allowing you to make larger investments within real estate. Not to mention, you get to work with the lenders at First Western Federal Savings Bank. Our team is here to help you through your IRA non-recourse loan questions — give us a call today