Using Self-Directed Retirement Plans to Buy Real Estate

A growing trend is developing where investors are seizing the opportunity created by the nationwide housing slump.  The trend is using IRA monies to buy these homes! This strategy could be a perfect fit for your portfolio woes.

The IRS allows all types of real estate to be purchased by an IRA.  Including single family, multi-family, timeshares, rental property, office buildings and even tax liens.  Since the property will be held in a retirement account, there are certain IRS rules that investors must follow.  If not followed, there are stiff penalties, including the risk of having your IRA plan disqualified.  For example, an investor can NOT live in the property once the IRA has made the purchase.  Additionally, all expenses (upfront and ongoing) must be paid with funds from the IRA.  To get more info on the IRS rules, check the IRS website.  http://www.irs.gov

Those with smaller IRA balances can still take advantage of this opportunity.  Loans are available so you don’t have to fund the entire purchase with cash.  Typically, you will need 35% down, and financing will be available for the balance of the purchase price.  The loan must be made to the IRA entity, and not the individual.  We have a couple of sources for this kind of financing, so let us know if you need a referral!

Before you go jumping into this, it is important to have an experienced trustee that allows real property to be held as an asset within the account.  Not all trustees allow this type of investment! You should spend some time choosing this trustee and make sure they are familiar with IRS regulations, and can answer your questions as they relate to this type of investment.  The right custodian will work hand in hand with us, your real estate professional, and make the transaction both easy and legal!

For recommendations on trustees familiar with this type of investment, contact anyone here at the Get Home Denver Team!