Investing In Real Estate With Your IRA Funds

investing in real estate IRA investments

The Pros and Cons of a Real Estate IRA

Many experts agree that real estate is currently at a 30-year low in many markets, making it an attractive investment opportunity for big Wall Street companies. These companies are choosing to invest in real estate instead of stocks because they believe that it can provide a better return on their investment property.

This trend has been widely reported in publications such as the Wall Street Journal and the New York Times.

So, why does just about every American still trusting their own retirement portfolio… IRAs… 401ks… with the stock market?

The answer is, they don’t know any better.

It is important to note that this guide is for informational purposes only and should not be taken as financial, tax, or legal advice. We are not financial advisors, and you should always consult your own professional advisors before making any financial decisions. This guide is simply meant to provide general information about a particular topic.

purchase real estate with a traditional ira
Ugly houses like this don’t scare us!

The Self-Directed IRA for Real Estate Investments

There’s something called a Self-Directed IRA.

They’ve been around for a while… and in the past several years, lots of people have realized that their IRAs aren’t earning them a darn thing (sometimes even losing enough money).  So, those people (maybe this is you) have started to look for other ways to earn better returns with that same IRA.

Enter the “self-directed IRA”.

A self-directed IRA is simple. It’s a retirement account that has the same tax benefits as a normal IRA… but, you have more flexibility in deciding what you want your IRA to be invested in.

write off your mortgage interest
We make real estate investing as fun and Monopoly

You can invest in…

  • Real estate investments (commercial, rental income-generating property, rehabs, etc.)
  • Promissory Notes secured by mortgages (i.e. – private lending)
  • Tax lien certificates
  • Limited partnerships
  • LLC’s
  • Sub-C corporations
  • Real estate options
  • Some types of precious metals
  • … and the normal investments like stocks that your normal IRA can invest in

Basically, this opens it up so you can buy an investment property with your real estate IRA… or be a private lender in real estate.

nab a real estate property that could be tax free
Scary houses like this are so profitable

Are There Restrictions To Using A Real Estate IRA?

Yes, there definitely are.

There are restrictions on what you do with the real estate IRA if you buy rental property and hold… what types of precious metals… and often times the “custodian” of the SDIRA has restrictions on what they think you can and should invest in.

A custodian? What’s that?

Great questions.

not all IRA custodians are the same
Your custodian will take care of you

Self-Directed IRA Custodians

The US Government created the SD-IRA loophole to help investors take more control over their investments while at the same time still getting the tax advantages and tax deductions. But, at the same time… they don’t want people setting up these SD-IRAs and just doing whatever they want.

So there is a barrier that they have to have in place… and that’s the custodian.

The custodian is usually the Self-Directed IRA company who you have your real estate IRA with. They act as the “go-between” when you’re going to make an IRA investment.

Many custodians have guidelines on what you can invest in, how long it will take for you to actually make your money work for you once they approve the investment properties… etc.

Some custodians are more passive… and let you actually have a checkbook where you can write checks from your SD-IRA to make investments.

rental income-generating property outright
An example of the properties we have
You should do your homework and find the custodian that’s right for you before you buy and investment property.

Do some research to find the right fit for you.

Some have more expensive fees… and some are more flexible.

What To Ask A Self-Directed IRA Company About Real Estate Investments Before You Work With Them

Before you sign with an SD-IRA company and pour money into a real estate investment… ask them a few key questions.

  1. What are your fees?  – Fees can vary wildly. Some charge an annual fee based on the value of the account, some charge an annual fee, some charge large setup fees, etc. Find out what works for you. But, the idea is that by being able to invest in real estate with an IRA… you’ll more than makeup for the fees you’re paying with your higher returns.
  2. What’s the process for approving an investment? – Some companies can take up to 30 days+ to fund an investment after you send it in for approval. Some SD-IRAs give you what’s called “true checkbook control”, where you actually get a checkbook where you can write checks from your IRA account… which gives you immediate access to the IRA funds (i.e. – to close a deal quickly). Checkbook control usually is a tad more expensive to set up than an IRA account that requires all alternative investments to go through the sometimes lengthy custodian approval process, but again… find out what’s best for you.
  3. Are there any restrictions on what I can invest in and grow my retirement plan? I want to invest in real estate and make private loans. – Some SD-IRAs with larger more traditional companies like Schwab and SmithBarney put restrictions on what your account can invest in.  Some don’t allow real estate… while others do.  Just ask.
  4. Is my individual retirement account eligible to “roll over” into an SD-IRA? – Not all retirement savings accounts can be rolled over into a self-directed IRA.  Most IRAs can be… and even some 401(k)s can be. Just ask your financial advisor and ask the representative at the SD-IRA company you’re working with.
  5. How long will it take for my account to be up and running and have funds available for investment purposes? – Some people wait way too long to get this process rolling. If you know you want to use your IRA to invest in real estate… get the ball rolling on getting it rolled over into an SD-IRA account asap.  Some companies may take weeks or even over a month to have your account setup completely and ready to invest.  So, don’t wait until you’ve found a great real estate deal to get started… get started today so your personal funds are ready to invest when you need them.
real estate investors make more tax free money than mutual funds by purchasing real estate
Get off the sidelines!

Getting Off The Sidelines And Getting Your Money Working For You With Real Estate IRAs

If you are interested in using a self-directed IRA to invest in real estate or other assets that you are familiar with, rather than the stock market, it may be worth considering this option.

It is important to take the time to educate yourself on the pros and cons of a self-directed IRA and how you can use it to invest in real estate.

There are many resources available online that can help you learn more about self-directed IRAs and how they work, including websites that provide information and guidance on this type of investment.

By doing your research and consulting with a certified financial planner or tax professional, you can determine if a self-directed IRA is a suitable option for your individual financial situation.

If you have any questions about how you can use your real estate IRA and work with us as an investor

Just connect with us through our contact form or call us anytime at (888) 290-4353.

We’re an investment company that offers discount investment properties across the United States to investors like you who often buy them and keep them as a rental property.

Also, for those qualified investors who want to explore private lending… contact us and we’ll talk about how we work with private lenders as well.

Happy investing!  We’re here as a resource for you so don’t hesitate to connect with us anytime. Plus, we have commercial properties, rental properties, multi family homes, real estate assets, and even raw land for you to buy.

FAQ About Real Estate IRA Investments

Smart? Real estate with an IRA is tax deferred and grows your retirement savings
Quit Thinking About It and Take Action

Is it smart to buy real estate with a real estate IRA?

Whether it is smart to buy real estate with an IRA depends on your individual financial situation and goals.

According to financial advisor, Eric Roberge, “Using your IRA to invest in real estate can be a smart move, as it can provide diversification for your portfolio and the potential for steady, passive income.”

However, financial expert, Dave Ramsey, cautions that “Just because you can do something with your IRA, doesn’t mean you should. Using your IRA for real estate investing can be risky and may not be the best decision for everyone.”

How are real estate investments taxed in an real estate IRA?

Become a real estate investor and grow your retirement accounts, reduce your ira owned property taxes, avoid significant tax penalties and become tax free
The Tax Man Cometh

The taxation of of real estate IRA depends on the type of IRA and the type of income or gains generated by the investment property.

In general, a Traditional IRA and Roth IRA are tax-advantaged accounts, which means that any income or gains from the sale of real estate or rental property held in these accounts are typically not subject to taxes.

However, there may be some exceptions, such as if the investment property generates “unrelated business taxable income” or if a distribution is taken from the IRA before the account owner reaches the age of 59½. It is important to consult with a tax advisor or financial professional.

Related Terms: purchase property, lease property, other property related expenses, alternative assets, family members, purchased property, tax deferred growth, IRA owns, buy investment properties, non recourse loan, rental payments, property management, property purchased property manager, disqualified person, IRA money, investment decisions, IRA owner, IRA held property, paid cash, financial institution