This was a purchase transaction for a client in a 1031 exchange. The client was referred to us by one of our preferred Commercial Real Estate Brokerage firms with whom we do a load of business with. This property was one of a few purchase transactions that we were handling for the customer. The borrower was exchanging out of some multifamily downleg properties and moving his funds into a variety of absolute NNN investment properties.
The biggest challenge on this transaction turned out to be navigating through the self-directed IRA requirements and while concurrently adhering to the lender requirements. Because the buyers downleg exchange funds were being held by his self-directed Roth IRA, this ultimately meant that the loan docs needed to be signed the self-directed administrator. We were aware of this from the beginning but it turned out that the lender on the transaction when they issued the letter of interest they had not completely understood the potential hurdles that they would have to overcome in this transaction as a result of the borrowing structure. We were not aware that this was the first time for lender to make a loan with the self-directed IRA as the borrower.
This was not a traditional investment and required patience, understanding the structure, focus, and teamwork. The lender made some necessary considerations for the borrowers structure and remained committed to the transaction. The unique structure required the lender to obtain legal counsel to draft loan documents that met the self-directed IRA requirements and lender requirements. This resulted in some delays. However, you have to give credit where credit is due and despite all of the hurdles the lender was able to close on time! What a great business this is even with the difficulties we love the challenges that come with success.