Four Critical Mistakes to Avoid with a Real Estate IRA

A Real Estate IRA is a great opportunity. It’s freeing. It’s invigorating. It’s a thrilling way to potentially build up a major retirement nest egg so you can build wealth over the long term and enjoy the peace that comes with financial security.

But that doesn’t mean it’s fool-proof, either. If you want to make the most out of a Real Estate IRA in which you invest in real estate, you have to avoid some critical errors along the way. Here are four you need to be aware of:

Mistake #1: Not Hiring a Property Manager

Hiring a property manager is critical when you have a Real Estate IRA. Not only will it help take care of any problems with repairs, tenants, and other issues like that, but it will keep you from participating in a prohibited transaction since you are not allowed to provide services to your Real Estate IRA.

You know how the most effective investments seem to be when you purchase something—say shares of a mutual fund—and then leave it alone for years? You come back to it and, lo and behold, it’s grown. The same is often true of real estate. The more hands-off you keep yourself, the more you can think like an investor and not like a landlord. This has tremendous benefits to managing your investment well.

Mistake #2: Not Taking Advantage of Tax Benefits

Real estate investing is one of the most popular ways to grow wealth, true. But that doesn’t mean every one completely optimizes their wealth. For example, did you know that you can use a tax-deferred exchange inside your Real Estate IRA to defer UDIT tax?

These are the kinds of issues you’ll want to be aware of to maximize your investment. If you don’t take advantage of the tax benefits, you often end up paying more than you have to. For better returns, always look to optimize within the rules of Real Estate IRA investing.

Mistake #3: Not Knowing Your Limits

We’re not talking about your metaphorical limits in this case. We’re talking about the very real regulatory limits that have been put upon Real Estate IRAs so that investors like you can have their protections.

What does this mean? For example, you won’t be able to physically dwell inside one of your own properties within a Real Estate IRA. This ensures that people don’t use the Real Estate IRA to realize tax benefits that are meant to be for retirement investing, not for maintaining a current lifestyle.

You can find more of the regulations and restrictions that affect Real Estate IRAs here at our site. Make sure you read through them completely to get an idea of what you’re facing before you start off on your real estate investing journey.

Mistake #4: Waiting Too Long to Get Started

Finally, one of the most important things to remember about real estate is that it’s meant to grow over time when you make your investments the right way. Yes, you should absolutely exercise caution from the beginning and do your homework. You should absolutely know the lay of the land, so to speak. But beyond that, there’s no reason to put off your investing as something you “might do one day.”

Instead, we encourage you to begin your journey by learning more. You can keep reading more about Real Estate IRAs here at American IRA, or you can contact us at 686-7500-IRA. Either way, there is one step you can take to begin a potentially new journey that will change your investment life.