Non Recourse Loan Reserves (reserve funds left in your IRA) are an important piece of the process when planning that real estate purchase in your self directed IRA, SoloK or IRA LLC. We as a lender and you as an investor should concern yourself with the idea of keeping a liquidity buffer in your Plan so that any unforeseen expense or lack of income can be handled easily without causing stress to you or your IRA.
We as a Non Recourse Lender require that when your retirement plan is borrowing money for the purchase or refinance of an IRA held property that you keep at a minimum 15% of any and all loans outstanding in liquid funds inside the retirement plan. That way should there be some months without a tenant, unexpected repairs, or other unforeseen expenses the IRA can still make any loan payment, do any repair or handle any expense of the IRA or property owned by the IRA without stressing you or your plans finances. It just good business planning.
So when thinking about that property purchase with your self directed IRA, SoloK or IRA LLC, plan for the unexpected and keep some reserves leftover. You’ll sleep better at night!