Since the creation of IRAs (Individual Retirement Accounts) back in the early 1970s, the IRS has always permitted an IRA to purchase, hold, or flip real estate. You can find this information on the IRS website.
Therefore, when you use a Self-Directed IRA to buy real estate, you can now purchase:
- Undeveloped land
- Domestic or foreign real estate
- Residential or commercial property
- Homes to flip
You can do all of this and more, tax-free and without custodian consent (we’ll touch on the meaning of IRA custodians and custodian consent later).
Flipping a Home is as Simple as Writing a Check
When you’re a Self-Directed IRA owner, you have full authority and access to your retirement funds. In other words, you have “checkbook control.” With checkbook control, you can engage in real estate transactions and flip homes as easily as writing a check. You have the authority to make all real estate investment decisions on behalf of your IRA.
One of the best advantages of a checkbook control IRA is that when you wish to purchase a home with your self-directed IRA, you can make the purchase, pay for the improvements, and even sell/flip the property on your own without involving an IRA custodian. An IRA Custodian is a financial institution that stores your assets. You have to receive custodian consent in order to make any kind of investment. However, as a Self-Directed IRA owner, you have full control of investments.
Of course, another advantage when you purchase real estate with a Self-Directed IRA is that all income and gains are tax-free until a distribution is taken.
Flip Homes without the Consent of a Custodian
Checkbook control is the most efficient and cost effective way to flip homes with your retirement funds. You can use your IRA or 401(k) funds to purchase real estate and engage in flipping homes. Again, you do not need IRA custodian consent and you won’t have to deal with fees involved when you use IRA custodians. A traditional IRA custodian will not allow you use your IRA or retirement funds to purchase real estate. That’s why a Self-Directed IRA LLC with Checkbook Control is the answer.
Control the Entire House Flipping Transaction
Unlike a conventional Self-Directed IRA which requires high custodian fees, a Self-Directed IRA LLC allows you to buy real estate by simply writing a check. You now have total control to:
- Make a real estate purchase
- Pay for improvements
- Sell the property on your own
All of your IRA funds will be held at a local bank in the name of the Self-Directed IRA LLC. Your next step is to write a check from the IRA LLC account. You can also wire the funds from the IRC LLC bank account. Once that’s complete, you have the power the flip homes as you please. You don’t need an IRA custodian to sign the real estate transaction documents, either.
Use a Self-Directed IRA for Tax Free House Flipping
In the case of a Self-Directed Roth IRA LLC, all gains are tax-deferred. In other words, all gains regarding the house flipping transaction will flow-back to your IRA LLC completely tax-free.
At IRA Financial Group, our team will take care of setting up your entire Self-Directed IRA LLC structure. We can handle the process by phone, email, fax, or mail. It typically takes between 7-21 days to complete, but the timing largely depends on the state of formation and the custodian holding your retirement funds.
Our IRA experts and tax/ERISA (Employee Retirement Income Security Act) professionals are available to help reduce the setup time and cost to help simplify the process.