Last Updated on February 7, 2020
What is a Self-Directed IRA LLC?
The Self-Directed IRA LLC is an individual retirement account that allows plan participants to invest in alternative assets, such as real estate, along with traditional investments, such as stocks and bonds without custodian consent. This allows participants to make investments as quickly as writing a check or wiring funds from the IRA LLC bank account.
Although the IRS has allowed investors to use retirement funds to purchase real estate, the majority of financial institutions, like Vanguard and Bank of America, do not permit their clients to make such investments. As an alternative, more investors are beginning to use the Self-Directed IRA LLC to invest in real estate, the custodian control Self-Directed IRA and the Solo 401(k) plan.
The IRA states the following on their website:
“…..IRA law does not prohibit investing in real estate but trustees are not required to offer real estate as an option.”
According to IRS rules, you can engage in practically any type of real estate investment as long as it does not involve a disqualified person. Like a traditional IRA, all income and gains you generate will be tax-deferred or tax-free is you establish a Self-Directed Roth IRA. As a result, when you purchase real estate, you will not have to immediately pay tax on the returns of the investment. At the time you take a distribution (59 1/2 at the earliest), you will likely be at a lower tax-bracket and pay less in taxes.
What are the Benefits of Tax-Deferral?
Let’s take a look at how you will benefit through tax-deferral. Let us assume you establish your Self-Directed IRA LLC for real estate investments and to make other alternative investments. You keep it open for 20 years, generating an annual pre-tax rate return of 8%. Your federal income tax rate is 25%. After 20 years, your initial $100,000 Self-Directed IRA LLC real estate investment will be worth $466,098. After paying taxes, your earnings will be $349,572.
What Real Estate Investments can I Make with a Self-Directed IRA LLC?
As long as the transaction does not include a disqualified person, you can make the following self-directed IRA LLC real estate investments:
- Raw land
- Residential homes
- Commercial property
- Mobile homes
- Real estate notes
- Real estate purchase options
- Tax liens certificates
- Tax deeds
You can see that investing in real estate with a Self-Directed IRA can help you save more than if you use personal funds. A Self-Directed IRA LLC real estate investment can prove even more lucrative, thanks to the features of “checkbook control.” By establishing a Self-Directed IRA LLC with checkbook control, you can make any real estate investment without the consent of a custodian. Additionally, you can make an investment simply by writing a check, using a debit card or wiring funds from the newly established bank account for your LLC.
Self-Directed IRA LLC for Real Estate Investments
Establishing a Self-Directed IRA LLC is quick and easy. The first and most important step is to seek the consultation of a professional financial group, such as IRA Financial, the leading provider of checkbook control Self-Directed IRAs. IRA Financial has partnered with Capital One Bank to simplify how you establish your Self-Directed IRA. Now, you no longer need to leave the comforts of your home to setup an IRA LLC bank account.
You will be assigned to a specialist who will set up the entire structure, open the plan bank account and complete all necessary documentation on your behalf.
In just a few steps, you can begin your Self-Directed IRA LLC real estate investment.
- Transfer funds retirement-free: Your retirement funds from your current custodian must transfer to an IRS approved FDIC backed passive custodian. You can make transfers from any retirement account.
- Invest with the New LLC: You will direct the passive custodian to invest IRA funds into the new Limited Liability Company (LLC). Because the LLC is treated as a flow-through entity for federal income taxes, generally all income or gains of the LLC will flow to the IRA tax-free.
- Experience Investing with Checkbook Control: As manager of the self-directed IRA LLC, you gain completely authority over your real estate and other alternative asset investments, and can make investments at your choosing.
Get in Touch
If you have additional questions about making Self-Directed IRA LLC real estate investments, contact IRA Financial directly at 800-472-0646 or fill out a contact form to speak to one of our specialists.