IRA and Real Estate
Real estate has become one of the most popular nontraditional investment options for IRA and Roth IRA investors. Real estate offers diversification from overexposure to Wall Street for personal and retirement funds. After the 2008 financial crisis, many retirement investors began to appreciate the importance of having a well-balanced and diversified retirement portfolio that can help protect against another financial crisis.
Why Work With IRA Financial?
We help our clients take control of their retirement funds and gain the ability to invest in almost any type of investment tax-free. We have helped thousands of clients invest in foreign and domestic assets. When you choose us, you have a direct and unlimited access to our in-house tax and ERISA professionals to ensure that all established tax structures are IRS compliant. We offer a full IRS audit guarantee and stand by the legality of our structures and will fully defend their merits against any IRS audit.
IRA Financial Group’s tax and ERISA specialists have helped more than 12,000 clients self-direct their IRA and invest $4 billion in alternative assets, such as real-estate.
Founder of IRA Financial Group and former tax and ERISA attorney, Adam Bergman, has published seven books to help investors self-direct their individual retirement account.
Find IRA Financial Group on Forbes! Adam Bergman is a frequent contributor to Forbes.com and an official member of the Forbes Financial Council.
Helpful Tips For Buying Real Estate With Your IRA
The deposit and purchase price for the real estate property should be paid using Self-Directed IRA LLC funds or funds from a non-disqualified third-party.
No personal funds or funds from a “disqualified person” should be used.
All expenses, repairs, taxes incurred in connection with the Self-Directed IRA real estate investment should be paid using retirement funds – no personal funds should be used.
Funds are required for improvements or other matters involving the real estate investments. All funds should come from the Self-Directed IRA or from a non “disqualified person”.
If financing is needed for a real estate transaction, only non-recourse financing should be used. A non-recourse loan is a loan that is not personally guaranteed and whereby the lender’s only recourse is against the property and not against the borrower.
With a Self-Directed IRA the use of a non-recourse loan is subject to tax pursuant to Internal Revenue Code Section 514, which would not be the case with a Solo 401(k) Plan. This provides a very exciting investment opportunity for a self-employed individual or small business owner who is eligible for a Solo 401(k) Plan.
No services should be performed by the IRA holder or “disqualified person” regarding the real estate investment. Other than typical trustee type of services, no active services should be performed by the plan participant or a “disqualified person” with respect to the real estate transaction.
Title of the real estate purchased should be in the name of the Self-Directed IRA LLC. For example, if Joe Smith established a Self-Directed IRA LLC and named the LLC XYZ, LLC, title to real estate purchased by Joe’s Self-Directed IRA LLC would be as follows: XYZ LLC.
Keep good records of income and expenses generated by the real estate investment.
All income, gains or losses from the Self-Directed IRA LLC real estate investment should be allocated to the IRA.
Make sure you perform adequate diligence on the property you will be purchasing especially if it is in a state you do not live in.
Don’t engage in any self-dealing real estate transaction which would involve buying or selling real estate that personally benefits you or a “disqualified person”.
“What about your IRA, including rollover IRA? You need to look at state law, advises tax attorney Adam Bergman of New York’s IRA Financial Group.”
“Adam Bergman…gets several calls a day from clients like McDermott looking to invest their retirement funds in real estate. ‘Our average client has retirement accounts of about $150,000 and is looking to buy one or two properties.'”
“Jeff Brown…transferred roughly $50,000 from his workplace 401(k) to purchase homes to fix up and sell…He uses a self-directed IRA that he set up through IRA Financial Group in Miami Beach.”