Self-Directed Real Estate IRA

Little-Known Benefits of the Self-Directed Real Estate IRA

You may already know the benefits of the Self-Directed Real Estate IRA. Holding real estate within a Self-Directed IRA allows you to receive rent into a tax-protected account, building up a substantial amount of growth within a retirement plan. But are you aware of some of the lesser-known benefits that could potentially help your real estate retirement portfolio? Let’s look at some of these side benefits:

  • Borrowing money. It’s possible to borrow money within a Self-Directed IRA using non-recourse loans to purchase real estate. This means that you don’t have to wait for years or even decades as you build up the cash to make the kinds of investments you were hoping to make. Non-recourse financing also ensures that the lender won’t come after your personal property in the event of a default.
  • It’s possible to partner your IRA with someone else at the beginning of acquisition when you acquire a real estate asset, which means you don’t always have to make whole investments yourself. This is a great way for beginning investors to dip their toes into the water without having to take on the full risk of an entire real estate asset.
  • Want a mostly hands-off experience with a Self-Directed Real Estate IRA? That can come in the form of using a property manager, which is expected when you use a Real Estate IRA. Owning property through a Self-Directed IRA means that you’ll be expected to separate your personal benefits from your retirement investments. One way of doing that is by having a property manager deal with the property while your account collects the rent checks from the property manager. In this way, real estate can be a highly passive investment that grows over time, generating cash flow to your retirement accounts even while you focus on finding new investments.
  • Selling within an IRA. Capital gains taxes can be a lot and really add to your tax burden in a specific year. However, buying and selling property within a Self-Directed IRA means that these transactions would not be taxable in terms of having to pay on capital gains, thanks to the protections of the retirement account. In turn, you can use a Self-Directed Real Estate IRA for buying and selling properties, turning a profit, and generally building up the long-term value of your portfolio with minimal tax impact.
  • Deferring the UDIT tax. As you’ll see at our section on the Real Estate IRA, it’s possible to use the Self-Directed IRA to defer the UDIT tax.
  • Many people like to think that their retirement portfolio is well-diversified when they include both large-cap and small-cap stocks in it. But is that true diversification? True diversification occurs when an investor has investments that go beyond one asset class. Self-Directed IRAs are some of the most powerful tools for expanding one’s asset base to more than just the stock market.

The most obvious benefit of the Self-Directed Real Estate IRA is that it allows diversification and great growth potential for a retirement account. But the true benefits go beyond that. In addition to the tangible benefits above, there are real intangible benefits to holding more than one type of asset. It helps investors achieve a level of security and peace of mind. However, that doesn’t happen with poorly placed investments, even if those poorly placed investments are tax-protected. It’s important to do your due diligence, to learn the ins and outs of real estate investing and understand what an IRA can do to help.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.