Increase Your Buying Power: Partner Your Self-Directed IRA Funds to Make Investments

Regardless of how potentially successful an investment may be, sometimes even the most sophisticated investor either lacks capital or does not want to part with all of his or her investment funds to acquire an asset. Being frugal with your funds when considering an investment is always a good rule of thumb. Whatever your favorite cliché may be—you don’t want to bet the entire farm or put all your golden eggs in one basket. Even the most promising investment can go south and many do. However, just as many may not. But, do you really want to essentially gamble every dime you have to chance it?

The good news is: you don’t have to. Many savvy investors are aware that they can partner their investment funds with others in order to acquire assets to build wealth in their portfolios. Most commonly, this practice is applied when real estate investing. However, you are able to partner funds to acquire assets in other realms including, but not limited to private lending opportunities, oil and gas options, acquiring private placements and stock, precious metals, and any other alternative investment you wish to add to your self-directed IRA.

The better news is that you can partner your funds with anyone, and the disqualified persons rules may not apply when doing so. Although after the purchase of your investment, you are not able to conduct business within your IRA with disqualified persons. Doing so can cause heavy penalties or even disqualification of your IRA and no one wants that to happen, ever.

By educating yourself on the rules when partnering funds, you can make sound and viable decisions that will increase your buying power and hopefully reap the benefits you desire.

How partnering your self-directed IRA funds works

  • Identify your partners and the investment you would like to acquire.
  • The disqualified persons rules may not apply when partnering with another’s IRA funds, since you are not transacting with the individual. However, once the investment is acquired, your IRA may not perform any transactions with disqualified persons.
  • Perform due diligence on both the investment and your potential partners.
  • Decide the percentage of ownership of each partner.
  • Understand that based on ownership percentage, all income and expenses flow in-and-out of your IRA accordingly.
  • You can use your personal funds to partner with your IRA funds to invest, but you may not use personal funds to facilitate any portion of the IRA’s obligations of the investment.

Examples of potential partners

  • Your personal funds or funds you can personally guarantee, such as a home equity line of credit.
  • Another IRA—even that of a spouse, child or other disqualified person since you are transacting with their IRA and not the individual, which would be considered a prohibited transaction.
  • An individual’s personal or a business entity’s funds.

Advanta IRA highly recommends you consult with professionals (attorneys, CPAs, title companies, etc.) who are familiar with the requirements of partnering IRA funds to invest. Remaining in compliance with IRS regulations is critical, and those professionals should be able to successfully guide you through the process. Advanta IRA handles the administrative details of these transactions, ensuring proper titling, receiving income and paying expenses directly from your IRA, and also making sure your IRA transactions fall within IRS guidelines.

If you have questions regarding partnering your self-directed IRA funds to invest, please contact us.

About Jack Callahan

Jack proudly earned his bachelor’s degree in finance and multinational business from Florida State University and his law degree from the University of Florida College of Law. He established Advanta IRA in 2003 and has steadily nurtured and grown the company and the team every year since. Prior to founding Advanta IRA, Jack delivered specialized counsel to real estate investors, small business owners, and real estate professionals on tax, legal and financial matters. As an industry expert, Jack is a frequent speaker on self-directed retirement plans. He is an accredited continuing education instructor for the Florida and Georgia Bar Associations, Florida and Georgia Real Estate Commissions, and The American Institute of Certified Public Accountants.