No one cares more about your retirement than you do. That is why more than ever, smart investors need to know the advantage of tax-enhanced retirement plans. A self directed IRA is a retirement plan that allows you to choose where to invest your IRA money. Under your direction, your plan can invest in real estate, notes, limited partnerships, commercial paper and many other holdings.
Why Real Estate IRAs? All the proceeds from the sale of the property in an IRA can be reinvested in to your next property without giving a large percentage to the government as federal taxes. Real estate affords you the powerful combination of appreciation and income.
Types of property your IRA can own:
- single family and multi-family homes
- apartment buildings
- commerical property
- improved or unimproved land
- Trust Deeds and Tenant in Common Interests
Important Rules for Real Estate IRAs:
- Title to Assets- When you purchase real estate in a retirement account, the assets will be titled in the name of the custodian or the administrator. Your IRA funds never leave the IRA. Your IRA actually owns the asset.
- Percentage of Ownership- Real estate can be purchased with a fractional share by your IRA and held as Tenants in Common or you could opt to own the asset 100% by the IRA.
- You cannot Buy/Sell/Lease your Real Estate from a disqualified person. You cannot buy property you already own. You, your spouse, your descendents and their spouses, any entity the IRA holder has a greater than 50% share, or anyone providing services to the trustee or custodian.
- Real Estate Income and Expenses- All income that are produced by the Real Estate IRA must be returned to the IRA cash account. All expenses must be paid by the IRA cash account.
- IRA assets can finance a purchase- financing must be non-recourse financing. This may trigger the unrelated business income tax.
- No personal use- Real Estate owned inside an IRA account must be for investment purposes only with no personal use.
- Foreign property does qualify- as long as the property is for investment.