Real Estate in Your Self-Directed IRA
If you are considering investing in real estate, then this is one article you don’t want to miss! Many times people think they need access to cash to be able to invest. Purchasing real estate in a self-directed IRA is a solution that just might work for you. Below is an article that CEO of American IRA, LLC Jim Hitt wrote for us. Simple Acquisitions is not affiliated with American IRA. We offer them as a possible contact should you wish to investigate further how you can invest in real estate with a self-directed IRA. Simple Acquisitions welcome partners who wish to invest with their self-directed IRA funds. Drop us a line if you want more info. For now, enjoy Jim’s article.
Real Estate IRA?
Many people are surprised to learn that you can own real estate – not just REIT shares or other stocks, but actual land, condos, town homes, single family homes, and commercial real estate – within your Individual Retirement Arrangement.
The key to using your IRA to invest in real estate is a special vehicle called the ‘Self-Directed IRA,’ sometimes called a “Real Estate IRA.” With these plans, you take over the role normally played by investment companies, such as brokerage companies, mutual fund houses and insurance companies. Instead, you, or your designated representative, take close control of your IRA.
IRS rules don’t allow you to have possession of the assets directly, however. You can’t have a suitcase of stock certificates next to the pile of oily rags by the furnace in your garage and call that your IRA. Instead, you have to have a third party administrator hold the assets on your behalf. When you select American IRA, LLC as the administrator of your IRA account, however, you have much more flexibility to invest in what you know than you would with a traditional brokerage or insurance company. If you are a mediocre stock picker but a real estate ace, it makes sense for you to stick to your circle of competence. Our firm lays the administrative foundation, and lets you do what you do best – pick real estate – within your IRA.
Enjoy Nearly Unlimited Investment Options
Many people aren’t aware of the seemingly limitless invest options within a Self-Directed IRA-to name a few:
- Contrary to popular belief, you can, in fact, borrow money within your IRA to purchase real estate. It has to be non-recourse financing (terms may vary by lender); however, non-recourse financing and unrelated debt income tax (UDIT) will apply. UDIT is only assessed on the percentage of the profit that relates to borrowed funds. For more information on this topic, see our article on leveraged real estate.
- You can collect rental income, tax-deferred and all the income goes into your retirement account.
- You can own real estate within a Roth IRA and collect rental income, tax free.
- You can sell property within the IRA without having to worry about capital gains taxes.
- You can buy raw land.
- You can buy residential or commercial real estate.
- You can diversify by buying real estate in other countries.
- You can use a tax-deferred exchange inside your IRA to defer UDIT tax.
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