Schedule a consultation to discuss partnering SDIRAs:

In this segment, learn about partnering multiple self-directed IRAs and investment accounts together for a singular real estate transaction. In fact, I’m going to take you through 3 case studies of Equity Trust clients who have partnered with multiple self-directed IRAs as well as non-IRA money to buy a property, renovate it and resell it.

One of the most powerful concepts that we can teach here is how to potentially partner with multiple self-directed IRAs and investment accounts.

A client here has 10 IRAs/investment accounts. He has Roth’s for himself and his spouse, Coverdell Education Savings Accounts, even health savings accounts and he partners multiple self-directed accounts for singular real estate transactions.

The first case study is an example of a client that partnered three CESAs and his name is Brian. His first transaction occurred right outside of Nashville. Brian found a vacant lot for sale and he made an offer of $8,000. When he made the offer of $8,000, he structured the purchase as not Brian buying the property or his LLC, but rather his three children’s Coverdell Education Savings Accounts.

So, titling for the contract and eventually, the deed to the property read Equity Trust Company Custodian, For Benefit of his first son’s CESA account, undivided interest 50% and Equity Trust Company Custodian FBO, CESA account number two, undivided interest 25%, and Equity Trust Company Custodian FBO, CESA account number three, undivided interest 25%.

The capital contribution for the full $8,000: CESA account number one put $4000 in for the $8,000, therefor 50% equity. CESA account number two put in $2,000 for the $8,000 therefore 25% equity. CESA number three put in $2,000 as well, therefore getting 25% equity for the full $8,000 investment.

Brian’s sold the property as quickly as possible to a real estate developer. So in this instance he sold the vacant lot, bought it for $8,000, sold it for $60,000. After some closing costs he netted approximately a $50,000 tax free profit.

That’s $50,000 that never hit Brian’s 1040 as ordinary income because it was in his children’s Coverdell Education Savings Account. Now, he can use that $50,000 tax free for K through 12 education, and eventually if they go to college or some other type of post-secondary school, they can use that money tax free for those purposes.

The next one is a client who bought a rental property for $24,000 partnering their three Roth IRAs. It was actually a mother, her husband, and then her 19 year old daughter. They all used Roth IRAs for this transaction. They partnered on the deal a third, a third, a third. So on the titling they had Equity Trust Company Custodian, FBO, the father’s name, ROTH IRA, undivided interest 34%.

They gave the father’s Roth IRA 1% higher than the other two. And Equity Trust Company Custodian FBO, the mother’s Roth IRA, undivided interest, 33%. Equity Trust Company Custodian FBO, the daughter’s Roth IRA, undivided interest 33%. So essentially it was a third each.

In this instance they have about a 19% return on investment, cash on cash ROI on an annual basis. It comes out to about $4,500 on an annual basis. So each month when the rental check comes in, it’s split 34-33-33 into the respective Roth IRAs.

If we did the compounding interest on calculation, on the 19-year-old daughter’s Roth IRA starting with $8,000 as her initial investment. Over the course of 20 years, if we apply 19% year over year over year, she’ll have over $300,000 accumulated in that Roth IRA all 100% tax free.

So moving onto the last example. Gary bought a property. The all-in purchase and rehab cost was about $71,500. The way he structured this transaction is he partnered his IRA as 75% owner and then his non-IRA money as 25% owner. As you can see on the screen the titling was as follows: Equity Trust Company Custodian FBO, Gary’s Roth IRA undivided interest 75% and Gary’s LLC on title, undivided interest 25%.

It’s very important when partnering with disqualified persons, everything must flow proportionately. So whatever the proportionate capital contribution is, all profits and all expenses have to flow accordingly.

So in this scenario, after the property was sold, Gary had approximately $25,000 tax free return to the Roth IRA. Then the remaining about $8,600 went to Gary’s LLC, which of course was taxable.

There are a number of ways in which you can partner multiple self-directed IRAs or investment accounts together, as well as partnering your IRA money with your non-IRA money. Of course, making sure that you’re doing everything within the rules and regulations. Of course, you can always look up this information on your own through Internal Revenue Code 4975….(read more)

LEARN MORE ABOUT: IRA Accounts

TRANSFER IRA TO GOLD: Gold IRA Account

TRANSFER IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA