IRA/401K Real Estate Investing

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A little know “secret” in real estate investing is that you can buy real estate with money that’s in your IRA or 401k, specifically through using a Self-Directed IRA.

Traditionally, people have used their IRAs to purchase stocks, mutual funds, or CDs. Very few realize that IRS code has allowed real estate purchases to anyone since 1974.

Almost all types of strategies can be purchased with a self-directed IRA. This includes all types of real estate, from commercial buildings to rental properties, vacant land to multi-family units, apartment buildings to condos.

The only drawback to self-directed IRA investing is that you can’t personally live in or in any way benefit from the use of your IRA’s properties. Furthermore, you’ll need to hire a trustee or custodian to hold your property, and this person or company will need to administer the account and file documents with the IRS. In addition, any money made by the property is returned to the IRA account.

It’s not all bad though, as the main benefit of purchasing real estate with a self-directed IRA is that all of the appreciation (capital gains) and income generated from the properties flow back into the IRA tax-free for you to use at retirement age!

Evaluate the below factors when deciding whether using a self-directed IRA for your real estate investing is the way to go for you:

• the property is actually “owned” by the IRA (as an LLC), not by you
• all property expenses, taxes, insurance, HOA fees, and maintenance need to be paid for out of the IRA
• you can’t benefit from the property while it’s owned by the self-directed IRA, and neither can immediate family members or business associates
• all income from the property is deferred, including capital gains and rental income
• you can buy and sell properties within the IRA, as long as all of the transactions are handled by a qualified intermediary

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