Like the price of real estate but don’t have the liquid funds?

(The information provided herein is for informational purposes only and should not be construed as investment advice)

Purchasing real estate with your IRA

Even though real estate is down at this time, it has proven historically to be a good investment. Plus, with the right properties, especially vacation properties, the rental income can often help cover the cost of your investment. This includes the purchase of real estate in Mexico as well as other foreign countries.

Though gaining in popularity, this is not a new process, and it is more commonly referred to as a self-directed IRA.

By purchasing real estate with an IRA, you are not changing what your retirement plan funds do (building tax-free value for use at some future date); you are simply changing the type of investment in your retirement account. (From stocks, bonds, and mutual funds to real estate)

There are several technical requirements to be aware of:

1. Purchasing real estate in an IRA is allowable under the ERSISA Act of 1974 (Employee Retirement Income Security Act)
2. Purchasers must have a separate investment account with the required documentation, plus abide by a few simple rules: Funds in the account cannot be commingled with other funds. For example you cannot pay for improvement with your personal money, in doing so, this voids the tax-free benefits of your IRA. Any rent collected from the property must be deposited into this account.
3. Most brokerage houses do not support or allow investors to hold real estate in an IRA. Therefore, individuals purchasing real state with their IRA’s must use an approved provider for both their account set-up and documentation*. (Entrust Arizona is one such brokerage located in the Phoenix area.)

*Note: It generally takes about two weeks to set up an account, transfer/close out an old IRA and get the funds into the new account.

Types of retirement accounts that can be moved into self-directed IRA’s: Traditional IRA’s, 401K’s, Keoghs, SEP IRA’s, ROTH IRA’s, Profit sharing IRA’S, Qualified annuities, Deferred compensation plans, and Coverdell Education Savings (ESA’s).

Investing in real estate through a self-directed IRA may or may not work for all individuals and only you can personally determine if it is right for you. As real estate agents, we are NOT financial advisors but we can help get you pointed in the right direction!