Real Estate in your Self-Directed IRA
Over time, real estate investments have afforded many people the powerful combination of appreciation and income. The purchase of real estate through a self-directed IRA is a popular choice for this and other reasons.
For over 7 years, American IRA, LLC has been providing clients with continuing education and seminars to put their retirement plan to work for them through real estate IRAs and self-directed IRAs.
A self-directed IRA or “real estate IRA” gives you the freedom to invest in alternative assets such as single-family and multi-unit homes, apartment buildings, condominiums (leveraged or unleveraged), improved or unimproved land, commercial property, and more.
Financing a Real Estate IRA Purchase
If your self-directed IRA doesn’t have enough money to pay for the entire purchase, you may be able to finance or leverage any income producing property. The property is used as the collateral for the loan. Because the property belongs to the IRA, the debt must be repaid from assets within the IRA, whether those are income from the property, permissible contributions, or other assets in the IRA.
There can be no personal guarantee given by you as the account holder and consequently, there can be no personal recourse against you since the property and the loan are held within the retirement plan.
You also may be able to partner your IRA with other investors as a way to share the ownership of an investment property.
Your transaction must flow through the tax-free or tax-deferred retirement account. The escrow must be opened by the account, not in the name of the beneficial owner. Vesting is always in the name of the account.
When purchased, the properties assets of your retirement plan or account.
- You may not personally own property that you intend to purchase with plan funds
- You must ensure that your intended purchase is not a prohibited transaction.
- Neither you, your spouse, nor your linear family members may have owned the property prior to its purchase by your plan.
- Neither you nor your linear family members may live in, lease, or have personal use of the property while it is owned by your plan.
- Your business may not lease or be located in or on any part of the property while it is owned by your plan.
- You may distribute without penalty any property from your plan as a normal or required minimum distribution.
Managing the Property
Administration of plan assets does not include property management conducted by the beneficial owner of an IRA or a company owned by more than 50% by the beneficial owner of real or personal property in the IRA.
The recordkeeping and administration fees charged by American IRA, LLC may be paid either directly through the plan or with personal funds, and may be tax deductible.
Title and Escrow Companies
When title and/or escrow companies are involved, proper instructions will be provided to them for all documents regarding your account. American IRA’s expert staff will contact the company and walk them through the smooth closing of your IRA owned property.
At AMERICAN IRA, LLC, we do this every day. We have simplified our processes so that you can quickly and easily take care of your real estate transactions.
American IRA, LLC does not offer investment, tax, financial or legal advice to clients. Individuals who believe they need advice should consult with the appropriate professional(s) licensed in that area.