Now that you invested with your self-directed account, what’s your next step? Did you know that a lack of available cash in your Self-Directed account can expose you to potential pitfalls in maintaining your investment?

In the Realm of Real Estate:

Maintaining available cash in your Self-Directed account is crucial when your IRA owns a piece of property. Unexpected expenses can come up at any moment.  You will have your regular monthly expenses like property management, landscaping, and cleaning services.  What do you do when the property is hit with unforeseen costs?  Emergency costs could include a roof repair, furnace or air conditioning replacement, or a water heater issue. These repairs can be expensive.  Having sufficient available cash in your account to cover unexpected expenses can save you both time and frustration.

On average, it takes about two weeks to transfer or roll over additional funds to your Self-Directed account.  A lack of reserve cash can potentially jeopardize your tenant or property. Ensuring you have an ample amount of available cash allows you to address these repairs immediately, safeguarding your tenant and property.

Ten Percent Reserve:

uDirect IRA Services mandates a 10% reserve for such expenses. This means that 10% of the property’s value needs to be set aside for the expenses the IRA is responsible for. Why 10%? Because this reserve can be used to pay bills related to the property since you cannot pay those expenses personally.

Regarding LLC Interests:

Did you know that investing in an LLC or entity often involves “Capital Call” requests for additional funding? What happens if you cannot meet such a request? In certain situations, failing to meet a capital call request could dilute your Self-Directed IRA’s percentage of ownership. If your IRA is the sole owner of the LLC, it may render you unable to cover the expenses incurred by the LLC, which could prove costly.

Capital Calls:

Capital Calls can happen at any time.  As a result, be prepared by having enough available cash in your account to meet these calls promptly. These calls often have deadlines, therefore the need to transfer or roll over additional funds is urgent.  The consequences for defaulting on a capital call are explained in the Investor Agreement associated with each fund.  Missing a call can include loss of equity and rights in the fund, interest charges, sale of the investor’s stake to third parties

According to IRS regulations, all expenses related to an investment held in your Self-Directed IRA must be paid by the IRA itself. Using personal funds to cover these expenses could result in a prohibited transaction.  Ensure your Self-Directed account maintains a sufficient balance of available cash.  If you have any questions, reach out and contact us at