I need additional funds to purchase a property. Can I obtain financing?

Posted on: December 10, 2019

Yes, you may obtain financing; however please keep in mind the following:

  1. The loan should not be issued by a Disqualified Person as that would constitute a prohibited transaction with negative tax consequences. 
  2. Additionally, the loan must be non-recourse. This means that the loan is backed by the property and not by the borrower personally. One cannot personally guarantee a loan issued to their IRA as that would constitute a prohibited transaction. 
  3. Lastly, when an IRA uses leverage to purchase an investment then the earnings attributable to the leveraged portion are subject to UDFI (Unrelated Debt Financed Income) and the filing of Form 990-T is required.