The following are three examples of mistakes that can happen when partnering your IRA funds. Protect your nest egg by avoiding them!
1) Partnering with a disqualified person on a pre-existing investment
Partnering with disqualified people is allowed on new investment opportunities only. Once an asset is owned by your IRA, you will want to avoid any and all dealings with a disqualified person.
2) Forgetting to do your research
Due diligence is a self-directed IRA investor’s best friend, and we encourage research, research, and more research before deciding that an opportunity is worth pursuing.
Make sure you perform due diligence when picking an investment partner. You will want to work with someone who is reliable, trustworthy, and knowledgeable.
3) Not properly dividing costs and profits
When partnering with another individual or a group, it is important that the division of costs and profits remains relative to the division at purchase.
For example, let’s say two self-directed IRA owners partner for a $200,000 real estate property, with Investor A contributing 60 percent (or $120,000) and Investor B contributing 40 percent (or $80,000). All future profits and expenses would need to be divided with the same 60/40 split, respectively, to avoid the risk of severe penalties.
Avoid risks by performing proper due diligence on your assets and understanding prohibited transactions, which we've outlined in this report. If you have further questions about the partnering strategy, arrange a complimentary consultation with one of our IRA specialists here.