Self-Directed IRA (SDIRA) Opportunities in Rental Housing Market
There is a common thought for many real estate investors in 2018. This is that, high real estate prices, increasing mortgage rates and low inventory make home ownership hard for individuals and families. This leads to more well-off Americans becoming renters.
Wall Street seems to have the same thoughts. According to a Wall Street Journal article, the number of homes purchased by major investors in 2017 was at least 29,000. This is up 60% from the previous year.
Well-to-do families who may have bought a single-family home in another time are more willing to rent a house now. Especially if it means access to a good school system. All of this helps Self-Directed IRA investors who have cash and are looking for attractive real estate opportunities.
Self-Directed IRA Opportunities
A SDIRA for real estate, also called a real estate IRA with checkbook control, is an IRS approved structure. It allows you to use your retirement funds to make real estate and other investments (alternative assets). This is tax-free and without custodian consent.
The SDIRA LLC involves the establishment of a limited liability company (LLC). The IRA owns the LLC and the IRA holder (or a third party) manages the LLC. As manager of the IRA LLC, you control the IRA assets to make the investments you want.
The IRS (Internal Revenue Service) has always permitted one to use retirement assets to purchase real estate rental properties. A Self-Directed IRA LLC solution allows investors to make real estate purchases and generate tax-deferred rental income. In the case of a Self-Directed Roth IRA, it’s tax-free rental income.
Advantage of Real Estate with a SDIRA
One of the major advantages of buying rental properties with a SDIRA is that all rental income is tax-deferred. Again, tax-free in the case of a Roth IRA, until a distribution is taken. In other words, you don’t have to buy real estate with personal funds and become subject to tax on the income or disposition of the asset. With a SDIRA real estate LLC with Checkbook Control, you can buy real estate, including rental properties without paying tax immediately.