Self-Directed IRA: 7 Types of Real Estate Allowed For Investors

Self-Directed IRA for Real Estate

A Self-directed IRA is the only retirement account that allows investors to pursue alternative investments. Among those alternatives, the most popular is real estate: a broad asset class that includes many different investment opportunities. Self-directed IRA investing offers great tax advantages to real estate investors, though the exact benefit will depend on the type of account used.

When investing through a self-directed IRA, your real estate investment options are nearly endless. Choose between rental properties (both residential and commercial), undeveloped land, fix-and-flip opportunities, and more. In this article, we will describe some of those opportunities by exploring seven types of real estate that can be held in a self-directed IRA:

1- Single-Family Homes
Single-family homes are the most common type of residential property, and the most common type of real estate found in self-directed IRAs. These properties can be the key to both short-term and long-term retirement strategies, with tenants bringing in regular rental payments to help boost savings.

2- Multi-Family Units
Multi-family units, such as apartments or condo complexes, are similar to single-family homes in that they can bring in regular rental income; however, because multi-family units are larger and bring in more tenants, they have greater potential to boost your savings. They can also require more maintenance, on the other hand, so be sure to consider all the angles before choosing an investment opportunity.

3- Commercial Property
From retail to office buildings, it’s all possible. If your self-directed IRA doesn’t have enough cash for these types of investments, your IRA can even apply for a non-recourse loan or partner with other funding sources. Commercial property is a broad category of real estate investments which includes anything from a grocery store or an office building to even a baseball field. This type of investment is another way to generate rental income over the long term.

4- Mortgage Notes
An indirect way to invest in real estate with a self-directed IRA is by funding mortgage notes. You could use your savings to be a real estate lender and help others purchase homes while also bringing in a profit for yourself. You set the terms of the loan, including time frames and interest rates. The payments will go directly to your retirement account.

5- Undeveloped Land
Undeveloped land offers great potential, acting as a blank canvas for investors to build their dreams. While this may not be a great choice for generating immediate rental income, these properties can be developed to produce a profit, sold to developers at a profit, or even sold to the government for use by the state.

6- Offshore Real Estate Investments
There are many benefits to investing offshore with an IRA. There are also things to consider, such as performing the proper due diligence and educating yourself not only on the tax laws in the United States, but the tax implications and transaction process in the country where you are investing. The U.S. government has created laws regarding offshore investing. For more information, consult a financial professional or tax advisor about real estate transactions and banking outside of the U.S.

7- Real Estate-Owned Properties
If a property has been foreclosed and taken back by the bank, it is referred to as real estate owned, or REO. In today’s real estate market, your Real Estate IRA can take advantage of purchasing distressed properties. Some real estate investors buy at foreclosure auctions; others buy REO properties directly from the bank. Have the property inspected by a professional to determine condition, as many REOs are sold “as-is.” You want to avoid any surprises.

A self-directed IRA provides the opportunity to save money for the future on a tax-deferred or tax-free basis. They also allow you to benefit from a variety of alternative investments not available through traditional retirement accounts.

Are you ready to grow your business by giving your clients more investment opportunities? Would your clients jump at the opportunity to invest in real estate tax free? Learn more about how self-directed IRAs can help you grow your business.

Before you invest in this business sector using your IRA, it is best to consult with your investment, legal and tax advisor. Entrust does not endorse or recommend any of these investments. Proper due diligence by you, the IRA holder, is recommended before entering into any transaction.

Original Source

BONNIE ROTUNDO
Realtor/Broker NC-SC
ABR, SRES, SFR, RRS, CRSP, CBPIS
Coldwell Banker Sloane Realty
16 Causeway Drive
Ocean Isle Beach, NC 28469
Direct: 910.443.0398
Toll-Free: 800.237.4609 X206
Fax: 910.579.5877

*Search Coastal Carolina Real Estate in real time on your own. No obligation. FREE sign-up below:
http://coastalrealestateproperty.com

Real Estate Investing: 7 Reasons To Consider A Roth IRA In Your Strategy

Real Estate Investing Roth IRA

Real Estate Investing: Roth IRA

Self-directed IRAs are the only retirement arrangements that allow individual investors the freedom to pursue alternative investments, such as real estate. Investing in real estate with a self-directed IRA offers many benefits to those who are looking for creative ways to save for the future. Before you start, you may want to consider which type of IRA would be best to invest from.

You have two options: Traditional IRA or Roth IRA.

The fundamental difference between a Traditional IRA and a Roth IRA is how they are taxed upon distribution. Choosing one of these options instead of the other can result in significant differences in the amount of wealth accumulated and the amount you can distribute tax-free.

Most importantly, Roth IRAs have features that may benefit investors who want to use an IRA to invest in real estate.

Here are seven reasons why you might consider this strategy:

1- Tax-Free or Tax-Deferred Earning
Self-directed IRA investing offers great tax advantages to real estate investors, though the exact benefit will depend on the type of account used. If you use a self-directed Traditional IRA, for example, you will not have to pay taxes on contributions or earnings until you start taking distributions during retirement. With a self-directed Roth IRA, however, your earnings will appreciate tax-free, allowing you to enjoy your profits without hassle from the IRS.

2- Wealth of Options
When investing through a self-directed IRA, your real estate investment options are nearly endless. Choose between rental properties (both residential and commercial), undeveloped land, fix-and-flip opportunities, mortgage notes, REITs, limited liability corporations, offshore real estate, and more. Investment restrictions include any work of art, rugs, antiques, gems, stamps, or any alcoholic beverages, as well as S Corps (S corporation tax laws prohibit IRAs to invest in them).

Investment restrictions include any work of art, rugs, antiques, gems, stamps, or any alcoholic beverages, as well as S Corps (S corporation tax laws prohibit IRAs to invest in them).

3- No RMDs While the IRA Holder Is Alive
There is no Required Minimum Distributions (RMDs) for Roth IRAs. The IRA owner doesn’t have to deplete their retirement assets even after age 70½.

Additionally, the IRA owner does not need to worry about liquidity or valuation for real estate assets. Simply put, they can pass assets to heirs tax-free.

4- Beneficiaries Enjoy Tax-Free Distributions
Beneficiaries have options for how they can deplete the inherited Roth IRA. The first option includes a complete lump sum distribution that’s tax-free, if the deceased has had a Roth IRA for 5 years.

Secondly, the five-year rule option lets beneficiaries leave assets in the Roth IRA until the fifth anniversary of the original owner’s death. After five years, the assets are distributed in a lump sum, tax-free. The annual distribution is calculated based on the beneficiaries’ age (life expectancy payment option).

5- Secure Future for You and Your Family
If you are an experienced real estate investor, you could be using your knowledge to help secure a comfortable future for yourself, as well as your family. Self-directed IRA rules protect your retirement savings from debt collectors, which means investments held in these accounts are more safeguarded.

Self-directed IRA rules also allow you to leave these savings to your heirs, so successful investing could mean a significant inheritance for your children.

6- Flexible Contributions Year-Round
You can withdraw contributions made to a Roth IRA tax and penalty-free at any time (i.e., ordering rules). Even if the owner has not satisfied the criteria to distribute the earnings tax-free, owners can withdraw some of the growth in value or earnings penalty free.

Examples: paying for medical expenses above 10 percent of the individual’s AGI or college expenses.

7- Contributions Are Allowed After Age 70½
If, like many people, IRA owners want to keep on working past the “normal” retirement age, owners can keep on contributing to a Roth IRA as long as their income falls within the limits.
Once your Roth IRA account has cash in it, you can start investing immediately.

You can even partner with other investors until you have enough cash to invest in real estate on your own.

Original Source

BONNIE ROTUNDO
Realtor/Broker NC-SC
ABR, SRES, SFR, RRS, CRSP, CBPIS
Coldwell Banker Sloane Realty
16 Causeway Drive
Ocean Isle Beach, NC 28469
Direct: 910.443.0398
Toll-Free: 800.237.4609 X206
Fax: 910.579.5877

*Search Coastal Carolina Real Estate in real time on your own. No obligation. FREE sign-up below:
http://coastalrealestateproperty.com