Wednesday, December 31, 2014

Using a Real Estate Self Directed IRA to Make Real Estate Income

Creating real estate income is something many investors have come to view as a basic portfolio ingredient. Whether you are in the accumulation phase or retirement phase of your life, betting on the paltry bond market for income has become frustrating at best. Many investors do not want to expose their portfolios to the risk of a volatile stock market either, though. Thus, many turn to real estate as a source of retirement income and historical capital appreciation. What many investors do not understand is that by holding real estate in a self-directed IRA, investment returns can be sheltered under the tax-advantaged umbrella associated with retirement plans. A self directed IRA removes one major real estate profit loss – taxes on capital gains. 



However it also shelters rental income by allowing you to distribute funds on a more precise basis from year to year. Until the age of 70.5, you determine when and how much is distributed from your IRA. Here are a few questions to consider before purchasing rental property outright:

·         Am I able to manage the property myself and be “landlord”? It’s perfectly acceptable for an IRA holder to manage their own rental property however there are certain limitations that apply. You may act as “landlord” but only from a decision making capacity. Any repairs or improvements made to the property must be contracted to non-disqualified parties and paid for by the IRA in proportion to ownership. 

·         Does my IRA have a large pool of available liquidity? Many investors gravitate toward their IRAs as a way to tap a large amount of cash, which lends itself easily to cash purchases of real estate.  If your IRA is highly illiquid, or if the liquid portion isn’t sufficient to purchase property outright, you may need to consider other strategies such as financing through a non-recourse loan or partnering your IRA funds with another entity. 

·         Is my plan to rent or lease my real estate to the general public? If you intend to live in a rental property and directly benefit from the space or lease out your real estate to a close relative, the transaction is considered prohibited and cannot be executed in an IRA. Any real estate income received under the qualified umbrella of an IRA must be from a disinterested third party. 
Holding real estate in a self-directed IRA gives investors the ability to own all types of real estate. If all goes as planned, your ability to generate regular, long-term real estate income during retirement will be greatly enhanced by the substantial unrealized gains achieved through years of tax-deferred growth. 

Not all IRA providers are created equal and the vast majority have no experience whatsoever with self-directed IRA real estate transactions. New Direction IRA encourages any investor considering a self-directed IRA to increase real estate income during retirement to weigh all options carefully. Our team of IRA specialists are here to help and answer any questions you have.

Wednesday, October 8, 2014

Ways to invest in Real Estate with your IRA

When investors say they want their IRA to invest in real estate, that can mean many things. While most account holders think of real estate investing as purchasing rental homes, Self-Directed IRAs can participate in real estate in a number of different ways. Knowing and understanding the vast array of options can help you make the best decision possible for your retirement goals.



The most common means of investing in real estate with a SDIRA is for the account to purchase and own property outright. This is usually done by account holders who are able to fund the full purchase price of the real estate from their account or apply for a non-recourse loan. If your account does not have enough funds to purchase a property outright, and you do not wish for your IRA to take out a non-recourse loan, there are several options available. Your IRA can partner with other entities, such as other IRAs, the account holder’s personal finances, other individuals, or a company(LLC, C-Corp., etc.), to fund the purchase of the real estate. The IRA would then be considered a “tenant-in-common” with the other entity or entities.

SDIRAs can also invest in real estate indirectly. Your account can buy private stock in an entity which purchases and owns real estate. Another available option allows you to make real estate loans via promissory notes to individuals or entities to purchase property. SDIRAs allow you to use your expertise and experience to make the real estate investment that is right for you.

An SDIRA can offer the flexibility of investing in all different types of real estate. Your IRA can purchase residential real estate, from single-family homes to apartment buildings. If you are more familiar with commercial real estate, you can use your expertise to invest in office buildings and other properties. If your background lies in agriculture or development, your IRA can purchase farm land or raw land.

One of the final variables in real estate investing involves your overall strategy for the property once it is acquired. This is one more area in which you as the SDIRA holder have many options. The property can be acquired and rented to tenants to generate rental income for the IRA. The account holder may also buy real estate to fix-and-flip or fix-and-hold properties in need to improvements. Real estate can be purchased for wholesale, raw land may be developed, and properties can be held for appreciation in value.

For individuals who want to incorporate real estate investing into their retirement plan, a Self-Directed IRA can provide a wide range of possibilities. From purchasing rental property to developing raw land, your SDIRA allows you to use your expertise and decide which real estate strategies are the best for you. New Direction IRA is here to offer the education and resources that can help you make the best decisions for your retirement investing.

Monday, July 28, 2014

Real Estate IRA Key Strategies

Many self directed IRA investors have purchased real estate and for good reasons. Real estate is a tangible asset that most people have had experience with, either through purchasing their own home or working as a real estate professional. Real estate is also an asset which rarely loses its entire value, unlike some investments which have that potential downside.  While real estate is a very accessible asset, investors do need to be mindful of the various strategies when it comes to investing with their retirement funds. Knowing these strategies can help you achieve your retirement goals.

IRAs can invest in many types of real estate, from commercial office buildings to single-family residences to farm land. Deciding what type of real estate you want to invest in is the first step to forming your real estate strategy. Your personal expertise, along with your ultimate goal for your IRA-owned real estate can help you make this determination. For example, an account holder with experience in owning rental property wants to retire in Hawaii. This investor may decide to use their IRA to purchase and rent out a single-family home in Hawaii with the goal of taking the property as a distribution upon reaching retirement age. 

After deciding what type of real estate to purchase, the account holder will need to decide how to fund the purchase. The most straightforward method of purchasing property is for the IRA to pay for the property outright, however if the account does not have the full purchase price there are options. The IRA can decide to partner with another IRA, with the IRA holder personally, with another person, or with an entity such as an LLC. If a partnership is not an attractive strategy for you, your IRA can apply for a non-recourse loan to fund the purchase. These loans are not personally guaranteed and, as such, often have higher interest rates and require a larger down payment than loans that have a personal guarantee. A real estate purchase can also be made through investing in an entity. This strategy usually sees multiple IRAs and/or other investors buying into an entity which then purchases a property.

Another strategy involves how the property will generate returns for the IRA. The real estate may be rented out with the IRA collecting monthly rental income, or the property may simply be left to appreciate in value. While the real estate is in the account, the IRA holder and their disqualified persons cannot personally use or perform any improvements on the property.

Once you reach age 59.5, you are able to take distributions from your IRA without the 10% penalty. This milestone presents the opportunity to strategize how the real estate will be distributed from your account. One option allows the account holder to distribute the entire property in-kind by retitling the deed from the IRA to the account holder personally. At this point, you are free to use the real estate as a primary residence or vacation home, or you can choose instead to continue renting the property and personally collect the rental income. If the property was purchased with a Roth IRA, you will be able to make a qualified distribution of the property without having to pay taxes on that distribution.

You may elect instead to take cash distributions out of the IRA. If the property is rented it can be left in the IRA and the account holder may instead distribute the rental income as needed. Another option is to sell the property and take the cash proceeds of the sale as a distribution.

Self directed IRA real estate investing is becoming more and more popular. While real estate is an asset that many account holders are familiar with, knowing and understanding the many strategies associated with this investment can help you make the most of your retirement.

Wednesday, April 16, 2014

Real Estate IRA Fees

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One of the main reasons people think Self-Directed IRAs aren’t worthwhile is because of the fees associated with them. However, the fees associated with SDIRAs are usually favorable when compared to fees you’d be assessed on an IRA with publicly-traded securities and at any brokerage house.

At New Direction IRA, we disclose our fees up front so account holder know exactly what they will pay and what they are paying for.

Let’s look at our NDIRA real estate IRA fees, which includes FREE online bill pay:

Application Fee: $50 (One time only when an IRA is opened)
Transaction Fee: $250 (Per purchase/sale/exchange of real estate)
Annual Fee Per Property: $295 (Other fee options available)
Bank Wire: $30 (Per outgoing wire)
Overnight mail: $30 (Per mailing)
Outgoing check fee: $10 (Per check we print and mail.)

Compare that to what you’d pay at another IRA or SDIRA provider and you’ll find it’s lower than most and comparable to all. The reason we’re able to keep our fees low is because we base it on the actual work we do—not a percentage. Also, no one at NDIRA works on commission nor do we sell investments so we are really working for you.

Our fees are only assessed when  your account activity necessitates it. In addition, we offer free SDIRA education and our client representatives are on hand to answer your questions and make your IRA acquisition process a smooth one.

With an NDIRA account, you can also enjoy industry-best technology that gives you more bang for your buck with our online client portal, myDirection®. You can make free online bill payments and pay a low, flat annual fee while checking account activity through myDirection®.  There, you can easily and quickly make payments for things like taxes, insurance, HOA fees, and more for free.

Lastly we offer two separate annual fee schedules for you to choose which is most economical for you and your account. One option assesses fees based on how many assets you have in your account while the other bases fees on your total account value. For more information, visit http://www.newdirectionira.com/real_estate_ira.php.