Directed IRA Cases Study

Case Study #1 Simple Interest Note(TheProcess)

• Nate transferred his existing Roth IRA, and HSA to Directed IRA/Directed Trust Company.

• I have a financial friend who flips property.

• Me and the borrower, Bob, agree to loan terms where my IRA and HSA will simultaneously lend Bob the money needed to buy and fix up a property.

• I work with Directed Trust Company to complete their

• "Note Purchase Authorization" or “Direction of Investment.”

• Promissory Note (drafted by an attorney).

• Borrower agrees to pay all my DIRA custodial fees and legal fees.

• We close in 5 days!

• Principle Balance: $100,000

• Initial loan Amount: $75,000

• Rehab Advances: $25,000 (held in escrow)

• Note Terms: Simple Interest Loan @ 12% Annually Interest Only Payments made monthly.

• Points up front: 2% (paid at closing)

• Loan Term: 18 month Balloon with Optional Extension

• After Repair Value: $215,000

• Cash on Cash Annual ROI: 14%

• The Lenders on the Note read as follows:

• "Directed Trust Company FBO Nate Hare Roth IRA"

• (As to the undivided interest of 75%)

• "Directed Trust Company FBO Nate Hare HSA"

• (As to the undivided interest of 25%)

• We close at a local title company. DIRA cuts the check.

• My note is secured by the property with a Deed of Trust.

• Promissory Note and Deed of Trust are held at DIRA.

• ALL interest payments are made monthly back to my Roth and HSA, COMPLETELY TAX-FREE!

• Borrower kept the property as a rental and refinanced to longer term financing with a traditional bank. 

• My Roth and HSA are made whole through the payoff from the refinance, and I can now re-deploy my capital into a new deal on a new property.

Key Points to Remember:

•Cannot loan money to yourself or a disqualified person. 

•You and your borrower are free to set the loan terms.

•IRAs can loan money secured or unsecured.

Case Study #2 Shared Equity Loan

Borrower needed $50,000 to purchase a mobile home on 2 acres of land.  The property was in a nice area, poised for growth in 5+ years.  This was a long term play...

•$50,000 loan amount - Roth IRA as lender.

•6% interest rate.

•No origination points.

•Borrower agreed to split any appreciation with the lender 50/50.

•Rental income was enough to cover the loan payments.

•Property was sold 7 years later for $130,000. (80k split 50/50 at closing)

IRA/LLC Structure 

Rather than a self-directed IRA taking ownership and buying an asset directly through your Administrator/Custodian, the self-directed IRA purchases the ownership in the LLC and the LLC takes ownership of the asset. In many instances, the IRA Owner manages the LLC (subject to legal restrictions).

•IRA invests $ into LLC Bank Account

•IRA Owner, Manager of LLC, No comp (Ellis v. Commissioner, case)

•LLC acquires investment (e.g., property)

•Case History, Swanson v. Commissioner, 106 T.C. 76 (1996), Hellweg v.

•Commissioner, T.C.Memo 2011-58, Ellis v. Commissioner, T.C. Memo 2013-245,

•DOL Advisory Opinion 97-23A,

•Single member LLC/disregarded entity, no LLC tax return.

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