Investing in Bank-Owned Real Estate in Your Self-Directed IRA

Real estate is booming – especially here in North Carolina and South Carolina. Which means a lot of people are looking for opportunities to get in while things are still hopping.

Buying distressed real estate is a compelling investment in nearly any cycle, if you can get it at a good price. But what if you could hold investment property in your retirement portfolio – and reap the benefits of tax deferral on both income and capital gains? Taking that a step further, what if you could own property under Roth rules – and thereby potentially enjoy all future rental income and capital appreciation tax-free?

It turns out that you can do precisely this – with a little bit of planning and a Self-Directed IRA. These accounts are excellent vehicles to enable real estate investing. You just have to do a bit of work in advance to enable your account to make these transactions on your behalf.

Why bank-owned real estate?

Here’s the dirty little secret of the investment world: Lenders hate to foreclose on properties. This is why they often approve a ‘short sale’ for less than the borrower owes on the house, and sometimes for less than the home is likely worth. Their core expertise is in lending, not property management or selling houses. When they wind up owning a home, the only thing they want to do is get rid of it at a decent price, and take the cash so they can lend it back out again.

That means opportunity for investors – but you have to be pretty agile.

REO and Auctions

Some real estate investors like to work auctions. There are terrific bargains to be had, but there is considerable risk, as well: Sales at auctions are typically ‘as is.’ If there are any issues with the house it’s the buyer’s problem, not the seller.

If you do want to play in the auction game, you need to check with your county officials to get the specific rules of the auction. Typically you’ll need to show up with proof of funds or you won’t even be allowed to participate. Bids happen quickly – and if you win, you will only have another day or so to actually come up with a cashier’s check or other means of paying. Otherwise the home will go to the next bidder.

If you go with non-auction REO (real estate owned) properties, there’s a bit less risk. You can normally get an inspection or appraisal done, and the lender that foreclosed on it will usually do a bit of basic clean-up and fix some items with the home, if they’re fairly obvious.

Don’t go through an agent.

Unless you’re brand new to real estate and this is your first deal and you need the handholding, you probably want to contact the lender directly about any properties they may be looking to auction or sell. They’ll get you the details about bidding procedures, as relevant, and you won’t have a sales commission making your offer that much less competitive to other bidders who don’t have to carry that additional overhead.

When you invest self-directed IRA money in real estate, you have some risk, but you also have unlimited potential, as well. Once we set up an account for you, you are limited only by your own skill, diligence and judgment.

All you have to do is open a self-directed IRA with American IRA, LLC, fund it (almost always via a direct rollover), and then tell us what transactions your IRA wants you to make for you. We would then provide you with a proof of funds document and verification, and upon your direction, wire the cash directly to the seller on your behalf.

As a third party administrator, we handle record-keeping and compliance, and we execute your transactions. Doing so gives you maximum freedom to invest you IRA or other retirement assets as you see fit.

American IRA, LLC is a recognized leader in real estate IRA administration. With offices in Asheville and Charlotte, North Carolina, American IRA, LLC works with successful investors all over the country.

For more information, call us today at 866-7500-IRA(472), or visit our website, We look forward to answering your questions!