Most mortgage lenders and other bank services won’t offer clients accounts that feature self-direct IRAs, using real estate investments instead of traditional stocks and bonds.
However, an increasing number of Realtors are investing time in studying the benefits of investment property and can help buyers find good deals on real property that is predicted to appreciate. Self-direct IRAs, initiated by the investor may not be subject to employee-sponsored rules set up by the Department of Labor. And there is no limit on the number of IRA accounts a taxpayer may have.
To prepare for a real estate IRA, designate an amount of the retirement fund that will be used to complete the property deal and open an account with an independent administrator. As most large banks will not recognize a real estate IRA, as this concept is fairly new, it’s probably best to use a community bank that will see the investment for its appreciation value, and offer to loan the remainder, taking on the responsibility of paying the taxes and collecting servicing fees.
Strict rules apply to a real estate IRA and breaking them destroy the tax-free status on the account.
• The land or house must be treated like any other investment.
• All rental profits must be returned to the trustee (the bank.)
• The trustee must hire a third party to manage the property for the purpose of collecting rents and maintaining or improving the property
• The property must remain in the trust until distribution at retirement. If the property must be sold, the proceeds can be transferred to another account for reinvestment.
• This purchase applies to investment property only and excludes the investors own dwelling. Upon retirement, the account can be turned over as a distribution at the current market value.
For more information or real estate IRAs and to receive free information on San Diego’s best investments, please contact our office directly! Peter@Peter-Toner.com or call us at 858-551-3311.
