Thursday, November 8, 2007
Buy Real Estate with Your IRA
Dear Sue
I was talking to a friend of mine about my disappointment in not having enough available cash to take advantage of some of the incredible real estate deals in today's market.
He told me that he was buying real estate through a self directed IRA. I have money in an IRA but it is mostly invested in mutual funds.
I would be interested in investing some of my retirement money in real estate. Can I do this?
Investor Mike
Dear Mike
Yes it is true. Anyone can buy real estate with IRA money if they open a “self directed” IRA account. Then you can make your own decisions regarding where your money is invested. Those investments can include real estate.
According to Uranga Associates, an IRA real estate company, there is approximately 10 trillion dollars invested in IRAs and other qualified plans. The majority of these funds are held in stock market-driven accounts. A very small portion is actually invested in real estate.
A handful of brokerage houses are set up for self directed IRAs, which allow a wide variety of non-traditional investments.
Most IRA investments are more conventional in nature such as Cds, mutual funds and stocks and bonds. If you set a up a self directed IRA you can buy mortgages, raw land, commercial buildings, vacation rentals, multi family homes, private notes, private stock, start up businesses and shares in LLCs just to name a few.
The good news for investors considering this strategy is that it can be done without cashing in your existing IRA account, and can be done penalty free, tax deferred, and sometimes even tax-free.
The IRS allows you to roll over your traditional IRA into a self directed IRA penalty free. The taxes due on the growth of the investments are deferred until distribution begins at retirement. If a self-directed ROTH IRA is involved, the principal and earnings are tax free when distributed at retirement.
The process is relatively simple. I rolled over my IRA after the dot com crash. I realized I didn’t know enough about the stock market to make intelligent investment decisions. My banker suggested that I should go into a self directed IRA and make real estate investments since real estate is my field.
She gave me a few names and I settled on a company called PENSCO located in San Francisco. My IRA funds were transferred to PENSCO who
became the custodian. I have been directing PENSCO to invest the funds in various pieces of property over the last several years. Since my IRA is not a ROTH I will have to pay taxes when the earnings are distributed to me.
I love it because I can personally manage the asset and I get to sell without any capital gains tax. I watch the rents I receive fund my retirement. The best thing is that it is all compounded.
There are some IRS rules about whom you can invest with. Please consult with your custodian for more details. You can also Google self directed IRAs or PENSCO and learn a lot.
For me it has been wonderful because I understand real estate. My returns have been far greater than any traditional IRA investments I have ever had. I love being able to see my investment and having a hands on relationship with it.
I have actually considered selling some of my present investments and buying some of those screaming deals that you have been noticing.
Why don’t you investigate the possibility of a self directed IRA? It could be a matter of Good Home $$s and Sense.
I was talking to a friend of mine about my disappointment in not having enough available cash to take advantage of some of the incredible real estate deals in today's market.
He told me that he was buying real estate through a self directed IRA. I have money in an IRA but it is mostly invested in mutual funds.
I would be interested in investing some of my retirement money in real estate. Can I do this?
Investor Mike
Dear Mike
Yes it is true. Anyone can buy real estate with IRA money if they open a “self directed” IRA account. Then you can make your own decisions regarding where your money is invested. Those investments can include real estate.
According to Uranga Associates, an IRA real estate company, there is approximately 10 trillion dollars invested in IRAs and other qualified plans. The majority of these funds are held in stock market-driven accounts. A very small portion is actually invested in real estate.
A handful of brokerage houses are set up for self directed IRAs, which allow a wide variety of non-traditional investments.
Most IRA investments are more conventional in nature such as Cds, mutual funds and stocks and bonds. If you set a up a self directed IRA you can buy mortgages, raw land, commercial buildings, vacation rentals, multi family homes, private notes, private stock, start up businesses and shares in LLCs just to name a few.
The good news for investors considering this strategy is that it can be done without cashing in your existing IRA account, and can be done penalty free, tax deferred, and sometimes even tax-free.
The IRS allows you to roll over your traditional IRA into a self directed IRA penalty free. The taxes due on the growth of the investments are deferred until distribution begins at retirement. If a self-directed ROTH IRA is involved, the principal and earnings are tax free when distributed at retirement.
The process is relatively simple. I rolled over my IRA after the dot com crash. I realized I didn’t know enough about the stock market to make intelligent investment decisions. My banker suggested that I should go into a self directed IRA and make real estate investments since real estate is my field.
She gave me a few names and I settled on a company called PENSCO located in San Francisco. My IRA funds were transferred to PENSCO who
became the custodian. I have been directing PENSCO to invest the funds in various pieces of property over the last several years. Since my IRA is not a ROTH I will have to pay taxes when the earnings are distributed to me.
I love it because I can personally manage the asset and I get to sell without any capital gains tax. I watch the rents I receive fund my retirement. The best thing is that it is all compounded.
There are some IRS rules about whom you can invest with. Please consult with your custodian for more details. You can also Google self directed IRAs or PENSCO and learn a lot.
For me it has been wonderful because I understand real estate. My returns have been far greater than any traditional IRA investments I have ever had. I love being able to see my investment and having a hands on relationship with it.
I have actually considered selling some of my present investments and buying some of those screaming deals that you have been noticing.
Why don’t you investigate the possibility of a self directed IRA? It could be a matter of Good Home $$s and Sense.
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