Is Real Estate the Right Choice for Your Self-Directed IRA?
One of the biggest advantages of a Self-Directed IRA is that you can invest in traditional assets like stocks and bonds, but you can also invest in less traditional options like real estate. In fact, real estate is one of the most popular Self-Directed IRA asset classes. But, how do you know if real estate investing is right for you and your retirement fund?
Here are the answers to some frequently asked questions regarding a Self-Directed IRA real estate investment:
1) How is buying real estate with a traditional loan different from investing in real estate through my Self-Directed IRA?
Many Self-Directed IRA holders mistakenly think that investing in real estate will be similar to buying a home. It’s a little bit different, but not complicated. There will be differences in the way the property is titled, how the property is funded, how the expenses and the income are handled and in the signatures and documentation required.
2) How much money do I need to have in my retirement account?
The answer to this question is difficult to determine because every property and every investment is different. Your Self-Directed IRA can pay cash and own the property 100%. Your Self-Directed IRA can partner with other people’s cash or other people’s retirement accounts and own a portion of the property; or you can take advantage of the power of leveraging and apply for a non-recourse loan. With all of these options available to investors, the amount of money you have in your IRA is not one of the most important factors.
3) Can I invest my Self-Directed IRA money in property that I already own?
At first glance this seems like a great idea, but it’s actually prohibited by the IRS. You cannot use your Self-Directed IRA to pay off a property you already own. It has to be a separate, arms-length transaction.
4) Do I need to know a lot about real estate to invest in it?
Investors typically do have a fair amount of background knowledge about real estate, but it isn’t required. You need to make sure you know enough so that you feel comfortable with your investment.
5) Do I have to pay someone to be my “custodian/administrator” to make that sure I follow all rules and regulations?
A Self-Directed IRA is great because they provide you with almost unlimited control over your investment choices, but they are also a bit more legally complex. You must have a federally approved custodian and most respectable custodians will do their part to ensure you are following IRS rules and regulations. Self-Directed IRA fees are relatively inexpensive and run approximately $350 – $500 a year.
What questions do you have about investing in real estate with your Self-Directed IRA? Post them in the comments and we will answer them for you!
I have established a relationship with the nation’s premiere Self-Directed IRA Company, Vantage Retirement Plans, LLC . If you are interested in opening a Self-Directed IRA or simply need to learn more about their services, I encourage you to contact them directly by emailing Info@VantageIRAs.com.
For all of your real estate investment needs, however, please be sure to contact me. I am standing by to serve you. Betsie Melter Realty ONE Group 480.734.3644 realtorbetsie@gmail.com www.betsiemelter.com
