Thursday, February 12, 2015

Using Your Self Directed IRA To Purchase Real Estate

Using Your Self Directed IRA To Purchase Real Estate

Most people have heard of an IRA but are not aware they can purchase and hold Real Estate inside their IRA.  To do this you must have an agent who is familiar with this type of transaction, someone to administrate your IRA and you must follow the IRS rules. 
As a fellow real estate investor, I have purchasing properties with the help of an IRA since 2007 and can help you do the same.  I personally have used my IRA to purchase real estate that I later rehabbed and sold, a home used for rental income, and I have generated income for my IRA from Promissory notes and mortgages I hold inside my IRA.  

The important thing to know is that you should discuss any potential investment with the 3rd Party Administrator and also you should refer to Internal Revenue Code Section 4975 which deal with prohibited transactions. 
In short, transactions not allowed are
1.      A Sale, exchange or lease between your IRA and a related party (disqualified persons per IRA are you, your children, grandchildren, spouse or parents or any business owned 50% or more by one of the disqualified parties.)

2.       Lending money to a related party

3.       Transferring the income or assets of the IRA to a related party

An example is you cannot purchase a rental and rent to your children, or purchase a vacation rental if you intend to use it for your own personal use too.  If the IRS disqualifies your investment your account will be considered distribuwhich could ted which can result in income taxes (and penalties unless you are at least age 59 ½).

You can Self Direct Roth or Traditional IRAs as well as Solo 401 Ks. 

If you want to purchase rental property in your IRA you are not allowed to manage the property yourself.

There are special rules for handling the funds and there are many companies out there that handle these types of accounts and can advise you of the fees they charge, how to get started and what not to do.  I personally have used The Entrust Group, AdvantaIRA Trust, LLC, I have other clients using Equity Trust and Provident Trust to name a few. 

For more information on these companies, visit their websites: 

Call Pam Brantley at Realty Masters to help you with your investment strategy, I can help you purchase and then provide the required management services for your investment. Email me your IRA questions at Pam Keen Brantley  or just give me a call.

Pam Brantley, Broker
Realty Masters of FL~ #1 in Pensacola Rental Homes!4400 Bayou Blvd. #58B, Pensacola, FL 32503Call us at (850) 473-3983 Over 45 Pensacola Rental Homes at
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