Getting Started in a Real Estate IRA
So you’ve made up your mind that you want to start a Real Estate IRA.
We’re assuming that you’ve already bought a property or two and you know the basics of buying and selling real estate, including doing due diligence on the property.
So what happens now?
- Find an Administrator/Custodian
First, you would need a qualified third party administrator or custodian to handle your transactions for you. IRS rules require real estate transactions within an IRA be handled by a neutral and disinterested third party. That’s where American IRA, LLC comes in. We are a third party administrator of real estate IRAs and other “self-directed” retirement accounts. It’s our job to handle your transactions accurately and timely, and to keep accurate records and forward them to the IRS on your behalf. So your first step, of course, is to open an account with American IRA, LLC.
- Fund your account. In most cases, American IRA’s clients fund their Real Estate IRA accounts with money they transfer from other IRAs, or from qualified retirement plans such as 401(k) plans.
You can also elect to transfer funds via a rollover. A rollover is when you take a distribution from your IRA and then return it to another IRA within 60 days. It is also considered a rollover when you move assets from a qualified retirement plan into a Traditional, Roth, or SEP IRA.
You can find all necessary forms for transfers and rollovers here.
Note: You aren’t limited to using a Traditional IRA. You can also elect to use a Roth IRA, SEP, Solo 401(k), Roth Solo 401(k) designated account, and even a Coverdell ESA or health savings account to hold the property. The best choice for you depends on your overall situation and investment objectives, as well as the amount of future contributions you’d like to be able to make. To maximize potential future contributions, check with a CPA to see if you are qualified to have a SEP or 401(k) account.
- Identify the property you want your Real Estate IRA to acquire. You already know how to do this.
- Provide American IRA, LLC your written direction to have your Real Estate IRA purchase the property on your behalf. You must give us specific information, including the property address, purchase amount, and seller identification. We will work with your professionals (attorney, CPA, realtor, etc.) to ensure that the paperwork is properly titled in your IRA’s name. Once we receive the paperwork from your professionals, we forward it to you so that you can review it and sign off on it as being ‘read and approved’. When all paperwork has been signed ‘read and approved’ by you, we sign it on behalf of your IRA and return the completed paperwork to your professionals.
You can download the relevant forms here.
- Manage your account. Real Estate IRAs are self-directed. That means you are the boss. You make all the decision about what to do with the internal cash flow of the properties and other assets within your IRA. You decide when and what to buy and sell. At this point, however, it is required that any rental income from the property be forwarded to us, directly, for deposit into your IRA’s cash management account. If you take money from rent or anything else generated from your IRA assets, you risk significant taxes and penalties.
American IRA, LLC, will do its best to help you stay within applicable rules and regulations for real estate IRAs, but ultimately the choice is yours. You are in the driver’s seat!
About us
At American IRA, LLC, we work with successful real estate IRA owners from coast to coast. We have offices in Asheville and Charlotte, North Carolina, but we are eager to work with investors from all over the country. Visit us at www.americanira.com, and download one of our exclusive guides to self-directed or real estate IRA investing. Or call us directly at 866-7500-IRA(472). We look forward to working with you!
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