Knowing your options when it comes to your self-directed IRA and real estate investments can pave the way for a more comfortable retirement in your later years. Investing in real estate is an excellent way to make the most out of your self-directed IRA. With the assistance of non recourse financing and finding a good deal, you can purchase real estate for a steep discount off its actual worth and potentially garner enough profits to pay off your non recourse loan and add substantially to your retirement funds. Non recourse loans protect your other assets by using the property you are purchasing as collateral for your loan. However, be sure to talk to your accountant or tax advisor about how Unrelated Business Income Tax could affect your repayment plan.
Self-directed IRAs are a great tool to buy foreclosed properties. These properties can be purchased for a reasonably low price and rented out. There is also the option purchasing a rental property such as an apartment building. Being your own property manager gives you the luxury of saving money on repairs and renovations. Instead of owning and maintaining property, you might also choose to buy and sell real estate-both domestic and foreign. Investing in raw land and personal loans are yet another way to make use of your self-directed IRA. Exercising any of the above listed options using your IRA funds could mean tax-deferred profits for your retirement! Because self-directed IRAs allow you to manage your own funds, you can complete any of these transactions easily, quickly and independently.
The IRS provides information about what sorts of transactions are prohibited with your self-directed IRA (e.g., re-buying investments you already own, buying or selling from spouses, children and parents), but the permitted investments are not discussed in as much detail. Examples of potential real estate investments that keep you, as the manager of your self-directed IRA, in compliance with Internal Revenue Code include: investment homes, second mortgages, condos, duplexes and tax lien certificates in addition to the options previously mentioned. Keep in mind that using any of your properties and purchases for personal use before you retire is defined as “indirect benefit” and could jeopardize the tax deferred status of your IRA. Be aware that as the owner of a self-directed IRA, it is your sole responsibility to ensure that you remain in compliance with Internal Revenue Code.
Although there are guidelines that must be followed, expanding your wealth by using your self-directed IRA for real estate investments is limited by your ingenuity and expert knowledge of the real estate industry more than anything else. Coupled with the power of non recourse financing, directing your own IRA gives the freedom and control you need to add only the most useful and valuable assets to your IRA portfolio. Investing in real estate brings with it attractive benefits such as compounded interest, asset protection, and reduced taxable income. Combining the freedom of self-directed IRAs with real estate investing can prove to be a wise and lucrative choice.
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