Commercial properties may be subject to pre-lease requirements and a historical analysis of cash flow will be performed if applicable.
Per IRS code, these must be non-recourse loans. Although you cannot personally guarantee the loan an analysis of personal debt service, net worth, and credit is required.
$300,000 Purchase Price
x 65% Maximum LTV
$195,000 FirstBank Mortgage Loan (to your Self-Directed Retirement Plan)
$195,000 Mortgage to your IRA
@ 4.75% (FIRM 5/30-year Mortgage)
$1,221/month Principal, Interest, Taxes & Insurance (PITI)
$1,800/month Proposed Rent
x 75% (to discount for vacancies, utilities, etc.)
$1,350/month "Discounted Rent"
$1,350 Discounted Rent
-$1,221 Mortgage Payment (PITI)
$129/month Positive Cash Flow
This property would qualify since the discounted rent is more than the principal, interest, taxes, and insurance payment.
It is important to understand that FirstBank can help you facilitate the financing of a property; however, we cannot give legal or accounting advice. Please consult your attorney, investment advisor, and/or tax consultant.