Most people do not know that they can use their IRA or 401(k) to buy real-estate. You can access your IRA at your local bank using an IRA check book which allows you complete control of your retirement savings.
These plans can then be used to invest in real-estate. It is also possible to get a loan to purchase real estate using your IRA as down payment which allows for diversification of your portfolio. This loan is a non recourse loan as required by the IRS.
Benefits of a self directed IRA LLC
One of the main reasons to do this is so as to diversify your portfolio.
You will not pay a penalty if you use this money with the additional benefit of growing it, instead of leaving it in the bank to earn minimal interest. Leveraging part of it will allow you to make real gains.
As a real-estate IRA investor, you are allowed to purchase
• Rental property
• Commercial buildings
• Multifamily apartments
• Rental property
Numerous savvy investors are now using self directed IRA’s to purchase real estate just as you would buy stock market securities. You will not incur early distribution taxes or penalties and additionally earn a tax deferred income from the rental payments you will receive. This is because the rent is seen as a return on your IRA and not an income and therefore not tax deductible. When you sell the property, the same rule applies and you will not be taxed.
Who is behind a self directed real estate IRA
This option has been available since 1974 when the Employee retirement Income Security Act was passed.
Using a non-recourse loan together with your IRA is a powerful wealth building tool. The first step is to make sure that you work with a reputable facilitator, real estate lender and tax professional.
How to make this possible.
The first thing that you should do is establish a self directed IRA. This means setting up a limited liability company so as to hold the assets.
1. Find an administrator willing to allow you to use your IRA funds.
2. Find out what the terms are, as most administrators are in it for the money, so do your homework.
3. Roll over your retirement benefits to the new account. You should know that
4. The more money you have, the better off your self-directed program will be
5. If you do not have enough money, you will need to be able to contribute $5,000 per year.
6. It will take you two to three weeks to open an account with a broker to hold your IRA
7. You cannot take advantage of the funds made until you retire.
Investing in real estate is a good move as it is a long term investment that will provide you with income, or save you some expenses like paying rent. Make sure you understand all the advantages and disadvantages of this type of investment. Seek legal advice and talk to an accountant and real-estate agent so as to find out exactly what will be required of you.
Rick Pendykoski offers practical retirement planning tips to people who are on the verge of retirement but are not financially prepared. He advises people to invest for their better future using their IRA plans and take help of retirement plan services to get the best advice. For more retirement planning tips,visit Self Directed Retirement Plans LLC.