Investing In Real Estate With Your IRA
Real estate is at a 30 year low right now in many markets. Recently, Wall Street Journal, New York Times, and other publications have shared information regarding large Wall Street companies buying real estate rather than stocks and seeing better return on their investments.
Please note: Co Vision Property Investments and it’s principals are not financial advisers. This guide is not offering financial, tax, or legal advice. It’s for informational purposes only. Please consult your professional advisers for comprehensive financial advise.
The Self-Directed IRA for Real Estate
Self-Directed IRA have been available for many years. Some investors have determined that traditional IRAs aren’t earning at an acceptable rate and have looked to other options to increase their return.
Self Directed IRA
A self-directed IRA is a retirement account that has the same tax benefits as a traditional IRA, however with more flexibility in determining the usage of the funds.
- Real estate (commercial, income generating rental property, rehabs, etc.)
- Promissory Notes secured by mortgages (i.e. – private lending)
- Tax lien certificates
- Limited partnerships
- Sub-C corporations
- Real estate options
- Some types of precious metals
These options give investors options to invest in real estate with your IRA monies or be a private lender in real estate for better return on monies.
Are There Restrictions?
Yes. There are restrictions on real estate transaction, types of precious metals, and often times the “custodian” of the SD-IRA has restrictions to impose as well.
Self-Directed IRA Custodians
The US Government created the SD-IRA to help investors take more control over their investments while at the same time still getting the tax benefits. To ensure compliance and accountability, they also implemented a custodian.
The custodian is typically the Self-Directed IRA company which holds the IRA. The custodian will act as the “go between” for your investments. Most custodians adhere to guidelines for investments including timelines for investment usage. Some custodians require less involvement and will provide the IRA holder a checkbook accessing the SD-IRA.
Custodians vary from fees, flexibility and available options and should be researched thoroughly to determine the best fit for your SD-IRA.
Suggested Self-Directed IRA Company Questions:
- What are the applicable fees? – Fees can vary greatly. Some charge an annual fee based on the value of the account, a flat annual fee, large setup fees, etc. Decide what will be the best option for your future expectations of usage. If choosing to invest in real estate, higher fees can be offset with higher returns.
- Investment approval process? – Some companies can take 30+ days to fund an investment after submission for approval. Some SD-IRA’s offer “true checkbook control”, for accessing the IRA account. This can be a preferred option for real estate giving the IRA holder quick access to funds (translates to a deal closing quickly). Checkbook control typically is associated with higher fees as opposed to an IRA account that requires all investments to go through the custodian approval process (can be lengthy).
- Are there any investment restrictions (real estate/private loans)? Some SD-IRAs with larger traditional companies such as Schwab and SmithBarney have restrictions on which investments can be made. Some exclude real estate. It’s always best to ask.
- Is my retirement account eligible to “roll over” into a SD-IRA? – Not all retirement accounts can be rolled over into a self-directed IRA. Historically, most IRAsand some 401(k)s can. For clarity, ask your financial adviser and the SD-IRA company representative.
- How long will it take for my account to be set up and have funds available for investment? Delays and company policy can often lead to significant delays. It’s best to have this step in place if planning to purchase/invest in real estate to avoid missed opportunities.
Making Your Money Work For You:
If you feel a self-directed IRA may be a great way for you to invest a portion of your retirement in real estate, start by discussing with your financial adviser, decide pros and cons and further research to see if this might be the best option for you. If you decide it is and are ready to get started, don’t hesitate contacting us today!
Becoming An Investor With Co Vision Property Investments:
Please use the contact form or call us anytime at: (970) 316-3278. We offer discount investment properties in Fort Collins and surrounding areas to investors, like you, who often buy them and keep them as rentals. We also have opportunities those qualified investors interested in private lending.