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With a Truly Self-Directed IRA you have the flexibility and freedom to purchase real estate for your retirement.

Section 408 of the Internal Revenue Code permits individuals to purchase land, commercial property, condominiums, residential property, trust deeds, or real estate contracts with funds held in many common forms of IRAs.  This includes a traditional IRA, a Roth IRA, and a Simplified Employee Pension plan, or SEP-IRA.

Investing your IRA in real estate is a much overlooked and underused opportunity. It opens up a broad range of  investment alternatives for those with real estate investing knowledge or those who work with knowledgeable advisors, sponsors, or brokers. Real estate has always been permitted in IRAs, but few people have been aware of this.  As the stock market has declined, people are looking for alternate investments for their retirement.  Real Estate is a great alternative.
 
Real Estate is a tangible asset that will almost never become completely worthless.  Historically, real estate investments have given many people the powerful combination of appreciation and income. For this reason, it has become a popular choice for investing.  It will give you the ability to compound investments tax free, reduce taxable income, diversify your retirement portfolio, and ultimately secure your financial future.

In order to have the freedom and flexibility to purchase real estate with your IRA you first need to set up an IRA LLC.  With this, your IRA makes one initial investment, then it owns the LLC (limited liability company). This will give you absolute checkbook control. You will be ready to make the purchases you want without having to get permission from anyone.  You are in control of your IRA.
 
Property Types- More FREEDOM, More CHOICES

It is exciting to know that when purchasing real estate in your retirement plan you can buy virtually any type of property.  This includes…

Raw land, Single family homes, Apartments, Mobile Homes, Commercial Real Estate, Mortgages, Tax Liens, Real Estate Notes, Foreign Real Estate, Vacation Properties, And various other Real Estate options!

With the IRA LLC  you will be able to perform maintenance on the property, advertise for renters, collect and deposit the rent checks, pay the real estate bills, etc. In return, it will save your IRA a lot of money and provide you with a more comfortable and prosperous retirement.

Regulations

As you consider investing your IRA in real estate, keep in mind that any investments your IRA makes cannot be for your benefit today. Your investments must be for your future benefit. 

  • Your IRA cannot directly or indirectly purchase real estate from a "disqualified person". This includes you, your spouse, your parents, and your children.
  • Neither you nor your family members (other than siblings) may live in or lease the property while it's in your plan.
  • Your business may not lease or be located in or on any part of the property while it's in your plan.
  • You cannot place a real estate property that you, your spouse, your parents, or your children already own into your IRA.
  • You cannot include a time share type property.

Leveraging
 
Leveraging is a tremendous wealth-building tool that is one of the main advantages of investing your Self-Directed IRA in real estate. When exploring the possibility of investing your IRA in real estate, a few questions may arise...

How do I pay for the property? Can my IRA actually take out a mortgage?

Your IRA can finance or leverage any income-producing property. The property is used as  collateral for the loan. The underlying property itself must be the only collateral for the loan. You may not pledge the assets of your IRA as the collateral for the loan.   A loan may only be in the form of a non-recourse promissory note and the IRA holder is not allowed to personally guarantee the non-recourse note.

Because the property belongs to your IRA, the debt must be repaid from assets within your IRA.  You can do this with income from the property, permissible contributions, or other assets in the IRA.

Since buying a property may require more funds than you currently have available in your IRA, you also can have your IRA purchase an interest in the property in conjunction with other individuals, such as a spouse, business associate, or friend. Also keep in mind that if the property is leveraged, the debt must be a non-recourse promissory note.

Ensuring the Tax-Deferred Status of the Account
All spending and earning must flow through the tax-free or tax-deferred retirement account. The escrow must be opened by the account, not in your name. Investing is always in the name of the account. The funds in your IRA may be used as good faith deposits, down payments, or purchase money.

A Self-Directed Roth IRA will allow you even greater tax savings benefits.  A Roth IRA is tax-deferred while growing, and tax-free upon distribution (a traditional IRA is taxed at the time of distribution). Also, a Roth IRA has no minimum distribution.  It is up to you (after 59½), when and how to take a distribution.  The Roth IRA may also be passed on to heirs without taxation.

If you are ready to direct your own IRA and invest in something besides stocks, bonds or mutual funds, you may want to consider investing your IRA in real estate.   With a Truly Self-Directed IRA LLC you are allowed the freedom to do just that.   This gives you the power to make the best investments at the best prices.  In return, there will be more money for your retirement which is the ultimate goal of any IRA.