Can my Self Directed IRA LLC get a mortgage on a piece of property?
Yes. The mortgage would need to be a non-recourse type of loan. With a nonrecourse loan, if your IRA fails to make the payments, the only recourse the lender has is the property itself. Also, note that if your IRA obtains a loan, unrelated debt financing income tax (UDFI) will apply, which will subject the portion of the income or gains that are debt financed to Unrelated Business Taxable Income (UBTI).
“Debt-financed property” refers to borrowing money to purchase the real estate (i.e., a leveraged asset that is held to produce income). In such cases, only the income attributable to the financed portion of the property is taxed; gain on the profit from the sale of the leveraged assets is also UDFI (unless the debt is paid off more than 12 months before the property is sold).
Please contact one of our Self Directed IRA Experts at 800-472-0646 for more information.