Can you use your IRA to Purchase Real Estate?
Short answer: hell yes!
Are you afraid to open up your retirement statements to see how far they have come down in value due to the volatile ups and downs of the stock market? Are you getting closer to retirement and wish you could put your IRA savings into something safer than the stock market, but realize that the return on an interest-bearing account, isn’t even keeping up with inflation? Has your investment advisor told you that you could actually use the money in your IRA to purchase real estate? Most likely, the answer to that question is, NO! Most financial planners don’t recommend real estate as they earn their money from stocks, bonds and annuities trading.
If you are looking for a better investment vehicle that can offer solid income and appreciation over time, an idea you may not have heard of, is a Self-Directed IRA. You can use the money in your IRA accounts to purchase real estate and still abide by all the IRS tax savings/deferred guidelines. There are four ways to do this:
1. 100% Purchase. If you have enough money in your IRA accounts (you can easily roll them over) you can purchase investment property and all of the rents collected go into your account. The appreciation also goes into your IRA account once you sell it.
2. Partner with Others (or their IRA’s). You don’t have enough money in your IRA to purchase a property outright? You can invest with other members of your family, friends, co-workers, etc., and go in together to purchase properties. They can use their self-directed IRA accounts too, cash, or they can get a loan to use as their share. The key is defining the percentage of ownership and making sure the profits and expenses are split accordingly.
3. Lend Money to Others Seeking to Invest in Real Estate. You use the money in your IRA to help savvy real estate investors purchase homes to either use as a rental, fix and hold, or fix and flip. You are the bank and are providing a private loan to the real estate investor, to financially assist them in purchasing properties. The terms are negotiated between you and the investor, and the property may be used as collateral.
4. Real Estate Derivatives. Quite a bit more complicated, but a tax-advantaged plan can also allow you to invest in real estate in ways that don’t always involve the acquisition of real property:
A. Real Estate Options
B. Tax Liens
C. Equity Crowd Funding
The key to all these options is selecting a reputable and knowledgeable Custodian and Realtor, who can help you set up your accounts and guide you along the way. The tax benefits and rules that need to be followed can be tricky! New Direction Trust Company is located in Louisville, Colorado and has been in business for over twenty years guiding thousands of customers along the way. Visit their website at: https://ndtco.com to find out more about their various programs. Great learning webinars are available through their site as well and if you want more in-depth information about this article, check it out at: https://ndtco.com/blog/four-ways-to-invest-in-real-estate-through-self-directed-accounts/
We at The Tucker Team are experienced in writing the contracts in accordance with the many requirements needed to not run afoul of the rules around buying real estate using an IRA. We also have helped investors find the right property to help them meet their investment goals and needs. Not only do we talk the talk: we walk the walk as well! We have self-directed IRA accounts set-up with New Direction and have actually invested and continue to invest, as outlined in items 1-3 above for the last ten plus years. Don’t hesitate to call us at (303) 854-1509 or email us at info@thetuckerteam.net for additional information on how we can help you invest confidently in real estate for your future.
*As always, one should consult their CPA, mortgage broker, attorney, or certified financial planner to make informed investment decisions.