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Investing In Real Estate With Your IRA

Updated: Oct 15, 2018

As you know, there aren't enough homes available relative to the number of buyers in the market, so buyers are snapping them up very quickly.  If you want to buy property when prices are at all-time highs in 2018, then buy property to live in and enjoy life. Florida’s market continue to improve as we close out the fall season.  Florida Realtors Association reported that October is the 3rd month in row that Florida’s housing market experienced an increase in new listings. The average detached home price rose 4.6% to $328,414 (YoY). Sales of single-family homes across FL totaled 26,273 last month, up 4.2% vs August 2017. Sales volume rose more than $900 Million and cash sales were up 1.2%.  This indicates signs of a healthy Florida housing market.


So, why are most Americans still trusting their own retirements... IRAs... 401ks... with the stock market? Answer is, they don't know any better.


Before we continue... note, we are not financial advisers and by no means should this guide be meant to act as financial, tax, or legal advice.  It's for informational purposes only. Consult your own professional advisers before you make any financial decisions like this.


The Self-Directed IRA for Real Estate

What is a Self-Directed IRA?  They've actually been around for a while... and in recent years, many people have realized that their IRAs aren't making them any money (sometimes even losing their money).  So, those people (maybe this is you) have started to look for other ways to earn better returns with that same IRA.


Enter the "self-directed IRA".

A self-directed IRA is simple. It's a retirement account that has the same tax benefits as a normal IRA... but, you have more flexibility in deciding what you want your IRA to be invested in.


You can invest in...

  • Limited partnerships

  • Real estate (commercial, income generating rental property, rehabs, etc.)

  • Promissory Notes secured by mortgages (i.e. - private lending)

  • Real estate options

  • Tax lien certificates

  • LLC's

  • Sub-C corporations

  • Some types of precious metals

  • ... and the normal investments like stocks that your normal IRA can invest in

Basically, this opens it up so you can buy investment real estate with your IRA... or be a private lender in real estate.


What Are There Restrictions?

There are restrictions on what you do can with the property if you chose to buy and hold and most of the time, the "custodian" of the SD-IRA has restrictions on what they believe you can and/or are allowed to invest in. What is a custodian?


Self-Directed IRA Custodians

The US Government created the SD-IRA loophole to help investors take more control over their investments while at the same time still getting the tax benefits. But, at the same time... they don't want people setting up these SD-IRAs and just doing whatever they feel like doing. So there is a barrier that they have to have in place... and that is the custodian.


The custodian is usually the Self-Directed IRA company who you have your IRA with. They act as the intermediate when you're going to make an investment.  Many custodians have guidelines on what you can invest in, how long it will take for you to actually make your money work for you once they approve the investment... etc. Some custodians are more passive... and let you actually have a checkbook where you can write checks from your SD-IRA to make investments.


We recommend you do your research and find the custodian that best suits you.

Some have more expensive fees than others... and some give more flexibility than others.


What To Ask A Self-Directed IRA Company Before You Work With Them

Before you sign on with a SD-IRA company... ask them a few key questions.

1. What are your fees?  - Fees can vary wildly. Some charge an annual fee based on the value of the account and others charge huge setup fees, etc. Never the less, the point is that by being able to invest in real estate with your IRA... you'll more than make up for the fees you're paying with your higher returns.


2. What's the process for approving an investment? - Some companies can take up to a month to fund an investment after you send in your request for approval. Some SD-IRA's give you what's called "true checkbook control", where you actually get a checkbook where you are allowed to write checks from your IRA account... which gives you immediate access to the funds (i.e. - to close a deal quickly). Checkbook control usually is a bit more expensive to establish than an IRA account that requires all investments to go through the stringent custodian approval process, but again... it's your choice.


3. Are there any restrictions on what I can invest in? I want to invest in real estate and make private loans. - Some SD-IRAs with larger more traditional companies put restrictions on what your account can invest in.  Some don't allow real estate... while others do.  Just ask.


3. Is my retirement account eligible to "roll over" into a SD-IRA? - Not all retirement accounts can be rolled over into a self-directed IRA.  Most IRAs can be... and even some 401(k)s can be. Just ask your financial adviser and ask the representative at the SD-IRA company you're working with.


4. How long will it take for my account to be up and running and have funds available for investment? - Some people wait way too long to get this process rolling. If you know you want to use your IRA to invest in real estate... get the ball rolling on getting it rolled over into a SD-IRA account asap.  Some companies may take weeks or even over a month to have your account setup complete and ready to invest.  So, don't wait until you've found a great real estate deal to get started... get started today so your funds are ready to invest when you need them.


Getting Off The Sidelines And Getting Your Money Working For You

If you feel a self-directed IRA may be a great way for you to invest a portion of your retirement in things you know (rather than the unpredictable stock market)... then get to it, take some time to learn about the pros and cons of a SD-IRA (those websites I put above are a great place to start. They have all kinds of resources to learn more about self-directed IRAs and how you can use them to invest in real estate).

If you have any questions on how you can work with us as an investor... just connect w/ us through our contact form or call us anytime at:  305-930-3945.  We offer discount investment properties in Fort Lauderdale and surrounding areas to investors like you who often buy them and keep them as rentals.  Also, for those qualified investors who want to explore private lending... contact us and we'll talk about how we work with private lenders as well.

Happy investing!  We're here as a resource for you so don't hesitate to connect with us anytime.


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