Yes, you CAN buy real estate with an IRA! The rules are clear and easy to follow, giving investors access to an alternative investment strategy that provides a critical hedge against inflation, tax-deferred growth and diversification for your retirement portfolio that also has much less volatility than the stock market. Keep reading to learn how to use your IRA to buy real estate.
Short for “Individual Retirement Account,” an IRA is a type of investment account that is provided by many financial institutions that provides tax advantages and other incentives to save for retirement.
Anyone over the age of 18 and living or working legally in the United States can have an IRA account, and there are many different types of IRAs for various circumstances. 401(k)s, TSPs, TSAs and certain other retirement accounts can also typically be rolled into an IRA.
Buying property with an IRA account allows you to own real estate with no penalties or tax consequences, as long as it is used as an investment property. Any rental income is tax-free, as are the capital gains when and if you decide to sell.
Most investment advisors won’t tell you how easy buying real estate with an IRA really is, simply because it doesn’t pay them commission, but history proves that it can easily beat the return on investment in typical retirement accounts that are invested in the stock market.
Buying Real Estate with an IRA in a top destination for investment purposes has multiple benefits, including enhanced security and better ROI than other investments, as well as excellent appreciation and protection against inflation.
It’s also important to stress that you cannot live in real estate that is purchased with your IRA account for investment purposes.
Due to the ease and safety of the transactions, real estate is actually one of the top investments in Self-Directed IRAs. Start by setting up the Self-Directed IRA, then transfer the necessary funds from your existing IRA or 401(k) retirement account(s) to the new Self-Directed IRA custodian. We always recommend working with an experienced real estate investment advisor to help ensure every step of this process goes smoothly, but here’s a quick overview of the process:
Q: Why haven’t I heard of this before?
A: Most likely, it’s because your traditional financial advisors aren’t interested in handling an investment that doesn’t pay commissions the way stocks, bonds and mutual funds do.
Q: Is buying real estate in an IRA a taxable event?
A: No. The investment is held in the same way as stocks and bonds – as a tax-sheltered asset in your retirement account.
Q: Can I be the property manager on the investment property?
A: No. The IRA owner will receive rental income and expense information, but the property must be managed by an independent third party.
Q: Can I rent out property owned by my IRA?
A: Yes. The IRS has no problem with your IRA renting, buying, selling to non-lineal relatives, including brothers, sisters, aunts, uncles, cousins, etc.
Q: Is there a limit to how much profit I can make?
A: No! there is no limit to the total return on investment you can make from real estate deals in a Self-Directed IRA account.
Q: Can I sell property I already own to my Self-Directed IRA?
A: No. You cannot personally own property in your IRA account.
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