Use Your IRA For Investing in Real Estate

One of the best, most secure, most certain to grow investments you can make is real estate, but with an IRA, investing in real estate never seems to be an option offered. That’s not, however, because you’re not allowed to invest in real estate with your retirement cash; rather, it’s because most IRA funds don’t take advantage of a little-known IRS rule that allows for it.

If you’re like most people holding IRA account, you have your funds invested with a bank or a brokerage. That means you’re limited to stocks, bonds, annuities, and other paper securities – not real property. In today’s market, that may mean your IRA funds are tanking, and it certainly means that they are not growing as robustly as they were five years ago. The real money to be made right now is in real estate.

You can get into IRA real estate investing by looking for custodians that specialize in real estate IRAs, using the rules contained in Section 408 in the Internal Revenue Code. These special IRAs build a portfolio around all kinds of cash-generating and appreciating real estate: commercial, residential, rental, industrial.

It is not legal to hold your own 408-based IRA; investing in real estate with your retirement funds must be done by special custodians. However, you have freedom in many ways to work with your IRA real estate. For one thing, your custodian holds your property, but doesn’t necessarily administer it, select properties to purchase, or even set and collect rents. These may all be your tasks, and they give you a great deal of leeway in how your own money gets invested.

It’s easy to see that an IRA investing in real estate gets very complex. Do rents get re-invested in your IRA? Can you charge yourself for administering your own properties and make cash from your IRA in that manner? What kinds of property can you purchase to include in your real estate IRA? Is it possible to hold foreign real estate in your domestic IRA? A good custodian can tell you the specific rules governing your IRA; real estate investing through this route is more complicated than just doing it yourself but the tax advantages make it worth it.

While if you work it properly you can benefit to a certain degree from IRA real estate investing beyond the simple IRA, you cannot put your own home into your IRA, nor can you lease space in one of your IRA properties for your own business. You also can’t put properties you or your immediate family already own into your IRA.

IRA investing in real estate rules do allow you to purchase property in conjunction with others to put into your fund, and it allows you to include some leveraged property as well, provided your custodian allows for it. You can also sell properties while they are in your IRA, provided you don’t sell them to yourself or to a family member.

One of the best ways to realize a great benefit from IRA investing in real estate is to hold a property that will become your retirement home in a Roth IRA. Upon maturity, you have the custodian distribute the property in-kind – assigning the title of the home directly to you. If you did this with a traditional IRA, you’d be liable for income tax based on the value of the property at the time of distribution; with a Roth, you owe nothing outside of costs associated with the transfer. There are few nicer gifts to give yourself to celebrate retirement.

Have You Considered the Benefit of IRA Investing in Real Estate?

Lets face it… most people who own IRAs, 401Ks or other retirement investments, rely on the expertise of a broker or some kind of custodian to manage their funds. Most of these managers don’t offer IRA investing in real estate as and investment vehicle. Most rely on stocks, bonds, mutual funds, etc. to make up their portfolio. Then at the end of the year, they may be happy to see that they have made a meager gain, and relieved if they haven’t lost anything.

IRA investing in real estate has made some nice gains for the savvy investor and could make your portfolio grow faster than in any other kind of investment.

When I had to make a choice as to where I should roll my 401K money, I had to rely on the recommendation of friends and family. I didn’t know anything about IRA real estate investing, so I chose a guy that a friend of mine told me about. They had almost 1 million dollars at one point, until the stock market plummeted and they saw their portfolio shrink.

Had they chosen IRA real estate investing, they could have turned their investments into millions.

Even so, they were happy with his performance overall. My wife and I met with the guy, liked his personality and decided to work with him.

Unfortunately, the gains we received were minimal. IRA investing in real estate wasn’t even offered by his firm, so most of my portfolio was a mix if stocks, bonds and mutual funds.

I was already working in real estate and started seeing articles on the internet about IRA real estate investing. People were using their IRAs and 401ks to buy income property, hold it for awhile and then sell it for a profit.

This property, if purchased properly, was giving a 12% or better return just from the rental income. Then when they sold it down the road, any profit was added on and the return on investment went through the roof. IRA investing in real estate was making millionaires.

This was when I saw the light and ventured into IRA real estate investing.

I did some research and found that IRA real estate investing was nothing new. It’s just that most people have never been introduced to the idea of using real estate as a vehicle to make their portfolio grow.

There is approximately 7 trillion dollars invested in retirement funds, but only 3% of those funds invested in real estate.

IRA real estate investing may be the holy grail of sound investments. Historically, real estate has always risen in value. Of course, this rise is quicker in some areas, and slower in others.

But overall, most real estate gains value over time. And the savvy investor can take his or her IRA and make a sound investment, with a predetermined gain. They now can have control over how fast their money grows.

But how do we go about using our IRA for real estate investing?

First of all, IRA investing in real estate is totally accepted by the IRS. You can invest in single family homes, apartment buildings, raw land, and even purchase shares of a limited partnership, land trust, c-corp or LLC. Virtually any kind of retirement fund can be used for the purchase of real estate.

Where do you begin? First of all you have to find a custodian that deals with self directed IRAs.
Once you roll your funds into this self directed IRA, you then can tell the custodian of this fund where you want to invest. They will be able to help you in choosing investments that fall within IRA guidelines.

They will be very familiar with helping their clients with IRA real estate investing and have all the paperwork necessary for a smooth fund transfer and purchase of the property.

You don’t want to be a landlord you say? Many properties are available with property managers in place. IRA investing investing in real estate can be passive and turnkey, if you choose the right people to work with. I didn’t want to be a landlord either, but found a program that is allowing me to see some fantastic gains without the headache of being a landlord.

In conclusion….you don’t have to watch your portfolio shrink every month. IRA real estate investing can be your answer to making a change. You now have a way to take charge of your future and watch your investments grow, with a safe investments and calculable gains.