Wild Stock Market Preventing You From Building Wealth in Your Retirement Account?
If so, you may want to join the growing number of people who are investing their retirement funds in real estate. There’s real long-term investment growth potential in using tax-deferred funds to purchase property.
The Problem With Most IRA’s
Most IRA Custodians-like brokerage companies and banks-limit your investment options to instruments that benefit them!
They offer you a menu of choices that include cash, CD’s, stocks, bonds, mutual funds, ETF’s, etc…
But Wait…You Have Other Options!
In reality, the IRS code does allow retirement plans to invest in a much broader selection of investments like:
* Real Estate (land, condos, commercial property, etc…)
* Trust Deeds
* Tax Lien Certificates
* Limited Partnerships
* Mortgage Notes
* Secured & Unsecured Loans
* And More…
To successfully navigate the IRS Code, you must find a professional firm who is experienced with this process.
Real Estate IRA Step #1: Find a Competent “Custodian”
The first step is to find an IRA Custodian that is experienced at handling the details of this process.
This has become a popular niche in recent years, and it shouldn’t be too hard to find a competent custodian. Ask your CPA or tax attorney if they handle “Self-Directed Retirement Plans” or who they would recommend. We just did a quick search on Google, and you’ll find lots of specialists promoting their services online.
You can’t serve as “Custodian” of your own account, and the “Custodian” is the firm who actually holds title to the real estate. Do your homework, and understand the process.
Real Estate IRA Step #2: Find a Suitable Property
You’ll probably want to enlist the help of a competent local real estate broker to find a suitable property. They’ll also help you manage all the little transaction details.
This is your retirement fund we’re talking about, so let the experts help you navigate the process and avoid surprises!
In addition to domestic homes, condos, land, and commercial properties, some custodians may permit you to purchase foreign property.
Real Estate IRA Step #3: Assembling Your Funds & Closing
Sometimes purchasing a property may require more funds than you currently have available in your IRA account.
Don’t despair! You can purchase an interest in the property in conjunction with other individuals.
What about your spouse, a business associate, or a friend-are their retirement plans declining in value from over-exposure to the stock market too?
Borrowing funds is possible, but the loan must be a non-recourse loan.
A non-recourse loan is secured by a pledge of collateral-typically real property-but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender’s recovery is limited to that collateral.
Non-recourse loans are still available, even in today’s risk-averse lending environment.
Expect lower loan-to-value ratios than with conventional financing, and you’ll often need to have 30-40% of the purchase price as a down payment.
A title/escrow company will prepare the closing documents, along with your custodian. At closing, the title to your newly-acquired property will reflect the name of your IRA Custodian for your benefit
Real Estate IRA Step #4: Operating Your Property
All expenses, including taxes, insurance, and repairs, must be paid from funds in your IRA.
You’ll need extra liquid funds available to pay these expenses. These funds can come from the deposit of rental income from the property into your IRA acct, or making annual contributions as the law allows.
Real Estate IRA Step #5: Selling Properties Held By Your IRA
It is possible to sell properties while they are held by your IRA, provided that the purchaser is not a family member.
After your sale closes, your IRA account now holds the cash proceeds, and you’re free shop for new investments!
Intrigued? Here’s Your Next Step…
PS: The process may sound a bit intimidating…but with the right experts helping you every step of the way, you’ll be surprised how quickly and easily you’ll be on your way to making your retirement dollars really work effectively for you.
*A Few Important Notes:
The IRS will not let you occupy your IRA-Owned property as a primary residence.
Furthermore, you cannot place real estate that you already own into your own IRA.
* This article is a highly simplified overview of a technical and specialized process. You should consult with an attorney, your CPA, and a qualified Custodian to complete an IRA real estate investment.