PURCHASING REAL ESTATE THROUGH YOUR IRA

Investing with your IRA – has been a hot topic I have been looking into for years.  This article, by RealtyShares is a starting point.  If you are curious on how to invest with your IRA – contact your financial consultant.  

PURCHASING REAL ESTATE THROUGH YOUR IRA

Real Estate is a true way to diversify and provides investors a more tangible alternative to the volatile stock market and the low-yield bond market. However, the fact remains that investors can’t access nontraditional assets like real estate through a traditional 401(k) or IRA. Rather, these investors, in order to take advantage of tax deferred returns, must invest exclusively in publicly traded securities like stocks and bonds.

Interestingly enough, real estate has been available to invest in using IRA’s, specifically Self-Directed IRA’s, under a little known IRS Code 4975. A Self-Directed IRA is an IRA like any other under IRS Publication 590 in terms of annual contributions, required minimum distributions, and types such as Traditional, ROTH, SEP, Simple 401K, Health Savings Account and Coverdell Education Accounts. However, it differs from a traditional IRA or 401(k) under IRS Code 4975, in that it allows one to invest in almost anything with the exclusion of life insurance, collectibles and S-corps.

The types of real estate assets that an investor can invest in using their Self-Directed IRA is quite broad and includes:

  • Residential or commercial real estate
  • Unimproved land
  • Rental houses
  • Multiple-occupant dwellings
  • Office buildings
  • Foreclosed properties
  • Deeds and mortgages
  • Crowdfunded Real Estate

The most important aspect of using Self-Directed IRA’s is understanding Prohibited Transactions. A Prohibited Transaction is the buying, selling, leasing, using, having any benefit or receiving compensation, directly or indirectly with a Prohibited Person, which is basically immediate family and lineal and a lineal descendants. In other words, one cannot invest in vacation property and vacation there, nor can they buy a condo for their parents to retire in, even if they rent it to them at market rates.

This post was written with the assistance of James A. Jones of Kingdom Trust Co. James is a national speaker and educator, and the most published author with 6 books in the Self-Directed IRA industry. He is also the Founder and CEO of the Self-Directed IRA Investment Institute and Vice President of Business Development for Kingdom Trust Co. He has pioneered the use of self-directed IRA’s in the Crowd funding space, and serves on the Board and Co-Chair of the Investor Committee for the Crowd funding Intermediary Regulatory Advocacy Group.

DISCLAIMER – The Caton Team does not endorse this company or product – all blog content is for your enjoyment.  Please contact your CPA for financial guidance.  

I read this article at: https://www.realtyshares.com/blog/purchasing-real-estate-through-your-ira

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Thanks for reading – Sabrina

The Caton Team – Susan & Sabrina – A Family of Realtors

Berkshire Hathaway HomeServices – Drysdale Properties

Sabrina BRE# 01413526 / Susan BRE #01238225 / Team BRE# 70000218/ Office BRE #01499008

 

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Sabrina Caton - The Caton Team Realtors

A native Californian with a passion for residential real estate and writing. A full time Realtor with Berkshire Hathaway HomeServices - Drysdale Properties.

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