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How Much Cash a Self-Directed IRA Needs to Close a Loan
By Jason Taken · Principal
Down payment, rehab, closing costs, and reserves on a self-directed IRA loan must come from the IRA. How to size that cash before you apply.
The account balance is the down payment. On a self-directed IRA loan, that sentence is the whole underwriting constraint. Personal checking, a spouse’s account, a credit card, and a friend’s wire cannot fill a shortfall. If the IRA cannot write the checks, the deal is too large for the account, or it belongs in an LLC instead.
Product overview: hard money for a self-directed IRA. Why your signature cannot backfill the gap: no personal guarantee.
The cash the account has to cover
Build the number in layers. Each layer is an IRA expense.
| Layer | What it pays | Whose money |
|---|---|---|
| Equity into the purchase and rehab | The portion the loan does not fund | IRA only |
| Closing costs | Title, escrow, recording, legal | IRA only |
| Lender fees | Origination, typically 0–3 points, plus processing | IRA only |
| Carry | Interest-only payments during the hold | IRA only |
| Insurance and taxes | Builder’s risk or vacant policy, property tax | IRA only |
| Custodian charges | Transaction and holding fees on the real estate | IRA only |
| Contingency | Overages the GC will actually bill | IRA only |
A recourse borrower sometimes arrives with 10% and a guarantee. An IRA borrower arrives with the unguaranteed slice already sitting at the custodian. If that slice is short, the cure is more IRA cash, a smaller purchase, or a different owner. It is not a personal deposit at the title company.
Why the slice is larger than a normal flip
Qualified fix-and-flip files can be quoted at up to 100% of cost, still capped around 75% of after-repair value, funding the lower figure. That path assumes a structure that can support the file. An IRA note is non-recourse. Leverage is quoted per file and is typically tighter, because the lender’s only recovery is the property.
Hard money pricing on qualified files is 8.99%–13.5% interest-only. Flip terms are 6–12 months. Bridge holds run longer, often 12–24 months, in the same rate band. A longer hold burns more IRA cash in interest even when the rate is unchanged. Do not model a 6-month flip budget and then sit on a bridge for two years inside the account.
DSCR loans at 5.75%–10.5% are not the takeout inside the IRA. If you need that payment and that leverage, the property should be financed in an LLC, not in the retirement account. See purchasing investment property with your IRA for the acquisition path, and fix and flip loans for a self-directed IRA for the rehab job.
An illustration, not a quote
Use this only to see the buckets. It is not a term sheet and not a leverage promise.
An IRA is looking at a house under contract for $260,000 with a $75,000 rehab. All-in cost is $335,000. Sold comps support an after-repair value near $445,000. Imagine the non-recourse quote funds $180,000. The account then brings $155,000 toward cost before any other check.
Now add what sits outside that split:
- Two points, if that is what the term sheet shows, is $3,600 on a $180,000 loan. The published range is 0–3 points, not a promise of two. Points and fees explains the line items.
- Interest-only carry: take 11% only as a midpoint inside 8.99%–13.5%, not as your rate. On $180,000 for six months, that illustration is about $9,900.
- Insurance, taxes, title, and custodian transaction fees still have to clear the IRA. Those invoices vary by county and custodian. Get them in writing before you rely on a round number.
A recourse borrower staring at “up to 100% of cost” might think the IRA only needs fees. This illustration is the opposite. The account is funding almost half the project cost, plus carry. If the custodian statement cannot cover $155,000 plus those extras, this particular contract does not fit this particular IRA. Ask for a smaller loan only if the property still works. Do not plan to “make up” $20,000 from a personal account on closing day.
Run your own purchase, rehab, and hold through the fix and flip calculator before you ask the custodian to move earnest money.
Reserves are not optional padding
Interest does not pause because the rehab slipped a month. A reserve inside the IRA is what pays the note while the property is vacant. The planning habit on these files is to show cash for several months of interest-only payments on top of the equity check. Six months of carry is a sensible planning target when the exit is a sale. It is not a substitute for a real budget.
Draws for rehab also have to be IRA money. The lender may fund a rehab holdback, and the custodian may have to approve each vendor payment. If the holdback is short, the next invoice still cannot be paid from your debit card. Price contingency in the IRA, not in your head.
Earnest money is the first live test. It leaves the custodian, not your checking account. If the custodian needs five business days to wire and your contract needs the deposit tomorrow, the contract is ahead of the account. Timing checklist: custodian steps before you apply.
What people try when the balance is short
These fixes feel practical. They are the ones that create a prohibited transaction. The IRS list is here: prohibited transactions.
- You write the earnest-money check, and the IRA “pays you back” after funding.
- Your spouse pays the insurance binder because the custodian was slow.
- You buy materials at the store and invoice the IRA later for your own labor and the receipt.
- A relative lends the IRA the missing down payment. Lending between the plan and a disqualified person is its own prohibited category.
- You contribute extra for the year and assume the cash is available the same afternoon. Contributions have limits. A rollover or transfer from another retirement account is a different process and is not instant.
If the math only works with one of those moves, do not apply yet. Either wait until the IRA holds enough cash, or buy the property outside the IRA. Mixing the two mid-contract is how clean deals become tax problems. More of those lines: moves that disqualify the account.
A smaller loan is not the same as a cheap loan
Non-recourse pricing can still sit inside 8.99%–13.5%. A smaller loan balance reduces dollars of interest. It does not reduce the rate by itself, and it increases the cash the IRA has tied up. Model both effects. A deal that “works” at full recourse leverage can fail when the IRA must leave $155,000 in the project and still pay interest-only on the rest.
Also model a miss on resale. If the property sells for less than the after-repair value you used, the IRA absorbs the loss. There is no personal guarantee forcing you to write a check, and there is also no personal guarantee protecting the account. The loss stays in the retirement account. That is the point of the structure, and it is why the cash you commit should be cash you can leave invested.
Debt-financed income inside an IRA can create tax inside the account (UDFI). Flips held for sale can raise the same conversation. This article does not calculate that tax. A CPA who files retirement-account returns should, before you lever the account. The acquisition guide flags the same issue: buying with your IRA.
When the balance is enough, pick the right card
Do not send this file through a rental refinance form. The cash you just sized is for a purchase and, if there is a rehab, for that rehab.
Go to what’s the deal you’re working on. Choose Fund my fix & flip or fix & hold when the IRA is funding a renovation and a sale or payoff. Choose Buy a property or bridge a close when the account is acquiring or beating a contract date without that rehab scope.
Leave the HELOC card and the cash-out card unused. Those products are not available inside the IRA. If you call (833) 264-7776, have the custodian statement and the contract in front of you so the cash gap is a number, not a guess.
Size the IRA check before you pick a card
Add equity, points if any, several months of interest-only, insurance, and custodian fees. If that total is not already in the account, wait or change the owner of the deal. When it is, use the deal menu and choose the flip card or the purchase card.
Rates, terms and conditions offered only to qualified borrowers and are subject to change at any time without notice. Closing times are in business days and commence upon receipt of appraisal payment and satisfaction of borrower conditions. Closing times may be delayed due to appraiser property access. All loans are subject to full underwriting for loan approvals. Jaken Finance Group only finances non-owner occupied investment properties. Figures in the illustration are not a quote. This article is not tax, legal, or investment advice.
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Jaken Finance Group, 2300 Barrington Road, Suite 400, Hoffman Estates, IL 60196