Real Estate IRA Wholesaling: the Simplest and Least-Expensive Way to Invest in Real Estate

Patricia McCrystal

October 7, 2015

Whether you’re a seasoned wholesale real estate investor or are simply interested in trying your hand in the market, using your IRA account to fund wholesale real estate investments has more than a few advantages. Real estate IRA wholesaling takes the pressure off your personal checkbook, and provides an alternative funding source for your investments – one that offers tax-deferred or tax-exempt growth on your investments until distribution.

The role of a real estate wholesaler is to put property under contract, and then assign or resell the property to another investor for a profit. Wholesalers put properties under contract with a contingency in place, and then work to quickly flip the property for a higher return. Investors pay wholesalers with cash, lines of credit, or hard money loans. If a real estate wholesaler isn’t able to resell the property before the date of closing, they can utilize said contingency to walk from the contract.

Real estate wholesaling is touted as being the simplest and least expensive way to invest in real estate, largely for the fact that very little money is needed for the wholesaler to put a property under contract. An additional bonus is not having to repair the property before selling it to another investor – in other words no fixing-and-flipping, just flipping!

Real estate IRA wholesaling looks similar to the typical real estate wholesaling process; the only real difference is that the investor can use his or her IRA or qualified retirement plan to fund the entire investment, or they can partner their IRA account with another IRA or qualified entity to make the purchase (beware ofdisqualified persons rules). Click here to learn more about the different types of IRA accounts.

In order to invest your IRA in real estate, you’ll need to hold an account with an administrator that allows you to invest your account funds in alternative assets (such as real estate, land, precious metals, private equity, private lending, and more). Once you’ve found a self-directed IRA administrator such as New Direction IRA, you can begin the journey of real estate IRA wholesaling. Call New Direction IRA toll free today at 877-742-1270 to start your new adventure as in real estate IRA wholesaling, and as always, happy investing!

Increase Cash Flow and Equity in Retirement by Leveraging Real Estate in Your IRA!

Patricia McCrystal

October 7th, 2015

Many real estate investors turn to self-directed IRAs to fund their investments with tax-advantaged retirement savings. Self-directed IRAs grant investors more freedom and control over their real estate investments, as they allow account holders to purchase nearly any asset type they desire to bring balance and diversity to their retirement portfolio (excluding life insurance and collectibles, per IRS rules). Any IRA account type can be self-directed, as long as you hold your IRA with a self-directed IRA provider like New Direction IRA.

There are several strategies real estate investors can utilize when investing their IRA funds. Investors are free to buy properties outright with IRA cash if they have the funds to do so. However, real estate investors may also consider purchasing two or three properties using leverage (a non-recourse loan) for the same amount of cash it would otherwise take to purchase a single property. Multiple properties can potentially award IRA real estate investors with more cash flow.

In order for a self-directed IRA to acquire a mortgage, the account holder must take out a non-recourse loan with their IRA. IRA non-recourse loans are not reported on investor’s credit records, because the loan is in the name of the IRA rather than the IRA account holder. A non-recourse loan stands to offer a great incentive for real estate investors who are interested in financing a multi-property portfolio. Keep in mind, with non-recourse financing, the bank’s only recourse is the property itself.

Reasons IRA Real Estate investors may use leverage to purchase multiple properties:

• After expenses, an investor can potentially accrue more net profits on a monthly basis with three properties rather than just one.
• The tenants of each property will be paying your mortgage through rent payments, in addition to building equity for you.
• You can use your properties’ cash flow to reduce your debt and therefore accelerate the payoff of your IRA’s loan.
• If the property value of each investment appreciates, you can gain three times the income flow that you would with only one property.
• If you are able to pay off any of your mortgage loans completely, your monthly cash flow in retirement increases dramatically.

Reasons that may hinder a real estate investor from debt-leveraging multiple properties with their IRA funds include the desire to avoid debt, the desire to avoid UBIT (Unrelated Business Income Tax ), and the hassle of managing three rental properties. Investors may also worry that there is a bigger chance of one of their tenants damaging their IRA properties and costing the investor money. Exercising due diligence when finding potential renters can help investors avoid long term damage or eviction costs.

Successful real estate investors are always conscious of current and projected market trends before making investments. When considering purchasing multiple properties, a real estate investor may be concerned about losing money if the real estate market turns, and they can no longer afford their mortgage payments.

One possible strategy for avoiding market woes: When considered a mortgage with your IRA, create a plan to pay off your mortgage before you retire. How large of a down payment can you afford? How quickly can you pay down the mortgage every month or year? If you can come up with logical solutions to these questions, you can potentially wind up with more cash flow from your real estate investments, sending more tax-advantaged savings back into your IRA and making retirement that much easier! Feel free to contact NewDirection IRA toll free at 877-742-1270 to learn more about leveraging your IRA real estate investments, and as always, happy investing!

New Direction CEO Bill Humphrey Talks Real Estate Investing for Retirement on RE/MAX of Boulder Podcast

Patricia McCrystal

July 14, 2015

Monday, July 13^th 2015 – In a podcast hosted by RE/MAX of Boulder, New Direction IRA’s CEO Bill Humphrey gave a rundown of the history of self-directed IRAs, and the benefits investors can glean from real estate investing for retirement. Podcast host Duane Duggan is a Broker Associate with Boulder Property Network, and was one of the attendees at New Direction IRA’s very first public continuing education meeting in Denver back in 2003. There was a familiar air between Humphrey and Duggan that allowed dialogue to flow easily and remain accessible for viewers and listeners of all knowledge bases.

Left to Right: Duane Duggan and Bill Humphrey

Duggan kicked off the podcast with a nod to New Direction’s growth since its conception in 2003, as the company now boasts $1.14 billion in account assets under its roof. Humphrey explained this number is indicative of self-directed IRA account growth in general, as more investors become disenchanted with the securities market and seek to invest their retirement savings into a more tangible asset market that they know and understand – such as real estate. In fact, Humphrey pointed out, “self-directed IRAs are the fastest growing segment of the retirement industry as a whole”.

So what kind of IRA does one need to take advantage of real estate investing for retirement? One that you’re in control of (Humphrey). Employer-provided retirement accounts such as 401(k)s typically only allow for securities investments. However, a Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Individual 401(k) and Checkbook IRA can be self-directed. With a self-directed IRA, investors can capitalize on their personal knowledge and experience of the real estate market to purchase real estate, fund fix-and-flip projects, purchase notes, deeds, and partner with other IRA accounts to finance a real estate purchase. You can even use self-directed Health Savings Account (HSA) to invest in real estate.

“Real Estate investors are finding that the IRS doesn’t define what account holders can invest in,” Humphrey explained, “the IRA administrator does.” In other words, the scope of investments your IRA is legally allowed to make is nearly limitless – the only investing limits an account holder may run up against are those exacted by the account administrator. A self-directed IRA administrator like New Direction IRA specializes in the bookkeeping for alternative asset investing so that account holders can invest in anything they desire, as long as it follows IRS guidelines (no life insurance or collectibles). “Any investment you’ve ever made is probably one that you can make through your IRA” (Humphrey). In fact, New Direction IRA was conceived because Co-founder and President Catherine Wynne was interested in investing retirement funds in real estate, and believed there should be a better market for self-directed IRA administrators.

What are the advantages of investing IRA money? Humphrey explained that the IRS made a deal with IRA holders – you can save money in your account and watch your IRA’s real estate investments grow on a tax deferred basis, as long as you as the account holder (along with other disqualified persons) don’t directly benefit from the funds or assets while they’re in the account. Once the account holder reaches legal distribution age, they can access their tax-deferred funds and/or take possession of their assets as a distribution.

“One of the aspects that turns real estate investors to self-directed IRAs is the spectacular market growth" (Humphrey). Your IRA can buy real estate and take advantage of market appreciation – something many Coloradans (particularly those living in the Boulder area for the past 20 years) can appreciate. Tenants from rental properties can send cash directly to your IRA account, which you can direct New Direction to either save in your account, or put toward more investments for your IRA. As far as depreciation goes, your IRA can benefit from depreciation as long as the property is debt leveraged. However, depreciation will not effect your personal finances, because the IRA owns the property, not the IRA account owner.

What is New Direction IRA’s role as a self-directed IRA administrator? New Direction does all the bookkeeping and administrative services for your IRA that is required by the IRS in order to keep a buffer between the IRA account holder and the IRA’s funds/assets. Because your IRA is the owner of all real estate investments made with the IRA funds, New Direction signs all contracts on behalf of your IRA, and sends checks from your account at the direction of the account holder. New Direction does not endorse or recommend any assets or asset providers: “We’re not here to tell people to not buy ocean front property in Arizona,” Humphrey joked, “we’re just here to make sure the paperwork is done right.”

You can watch the full podcast on Boulder Property Network’s YouTube site, and read RE/MAX of Boulder's blog about the podcast here. Visit New Direction IRA.com to learn more about how to start investing in real estate with your self-directed IRA today!

Become a First-Time Homeowner, Thanks to Your IRA (Even if You’ve Owned a Home Before)

Patricia McCrystal

July 10th, 2015

There’s no time like this summer to buy your first home. The market is booming, and you’re ready to stop shelling out cash to your landlord and invest in a long-term asset that will belong to you. Plus, you’ll finally be able to paint the walls!

If you have a Traditional IRA account, you may be able to use your retirement funds to finance the down payment of your first home. The distribution age of your Traditional IRA account normally isn’t until you reach 59.5 years of age; withdrawing assets or capital gains before that age can result in taxation and a substantial penalty.

However, IRA account owners are permitted to withdraw money before distribution age, penalty-free, in certain circumstances – in this case, IRA owners can withdraw up to $10,000 for qualified acquisition costs on a home, without paying the 10 percent penalty for early distribution. Qualified acquisition costs generally cover buying, building, or rebuilding your first home, as well as funding most settlement, financing and closing costs.

Since all contributions into your Traditional IRA account are deposited “pre-tax”, you will have to pay ordinary income taxes on the money you take as a distribution. This could potentially bump you up into a higher tax bracket. Additionally, you will no longer benefit from the compounding interest on your account’s lump sum.

Despite these caveats, there are more perks involved with this exemption: you can take distributions from your IRA account for home buyers other than yourself, including persons who are otherwise disqualified to interact with or benefit from your Traditional IRA in any way. Your distributions can be used to cover home buying/building expenses for your children, grandchildren, spouse, parents, mother in law, etc.

Additionally, you can qualify as a first-time home buyer even if you’ve owned a home before. As long as you haven’t owned a home dating back two years prior to (what will be) the closing date of your new home, according to the IRS you’re technically a first-time home buyer.

Using your Traditional IRA account to finance your first home (or in some cases, your second) can be a fabulous perk to regularly and sensibly investing in your IRA. Consult with your trusted financial adviser to weigh the costs and benefits of taking an early distribution to fund your first home. And as always, happy investing!

Titling Your IRA Real Estate Investment: Avoid Missteps to Save Time & Money

To Enjoy IRA Real Estate Tax Benefits, be Mindful of Costly Titling Mistakes.

Patricia McCrystal

June 25, 2015

That modest country cabin nestled down by the lake at your favorite vacation spot has finally been put on the market. It’s a regular fixer-upper, but you know a little love and hard work could transform the property into a beautiful modern getaway for renters year-round.

You plan to use your self-directed IRA to fund the investment so you can enjoy future gains on a tax-deferred basis. You understand this means you (and your family members who count as disqualified persons) will not be able to stay in the lake house; at least not unless you decide to keep the property after you reach the distribution age of your IRA account (for a Traditional and Roth IRA, that’s age 59.5), in addition to paying taxes on the property at distribution.

You contact your self-directed IRA administrator, New Direction IRA, to inform your client representative about your exciting investment opportunity, and to learn more about IRA real estate tax benefits. Although no disqualified people are allowed to be directly involved in the renovation process of the property, you have a friend from college who owns and operates a construction company who you think will be a perfect fit for the job.

In this fast paced market, you need to act soon before you’re outbid. But before you start signing papers, there are specific investment-titling rules that all real estate investors should keep at the forefront of their minds before initiating any transactions. Remaining conscious of the following guidelines will help you avoid common missteps and save yourself a lot of time and money when using your self-directed IRA to invest in real estate.

To start off, your self-directed IRA account must be opened and funded before a transaction can be initiated. You can fund the account with either a transfer, rollover, and/or a contribution. 

Always remember:  you and your IRA are NOT the same thing. Your IRA is a completely separate legal entity from you and your personal finances. By extension, you cannot pay any of the IRA’s expenses, and you cannot sign on behalf of your IRA.

When investing with retirement funds, all paperwork for that investment must reference the IRA as the buyer, not the IRA holder (you) as the buyer. If a form needs a signature, you should write “Read & Approved” in the margins, and then sign next to or beneath this note (also in the margins). You will then upload/email/fax the form to New Direction IRA, who will sign as the buyer or investor of the property. NDIRA also accepts e-signatures from companies like DocuSign and Adobe.

New Direction cannot fund your investment if these guidelines are not followed, and the investment ends up being titled under your personal name and/or social security number. You are a disqualified person, therefore trying to transfer the title of a contract from you to your IRA is a prohibited transaction. Once this mistake occurs, there is no way to change the titling from your name to your IRA, so be diligent in following the proper procedures for IRA investment-titling.

The IRA may partner with another person, entity, or IRA. In partnering, your IRA would own a percentage of the property, and the remaining portion would be owned by someone else. You may partner your IRA with personal funds and/or disqualified persons, but restrictions apply. See NDIRA's website for more details.

When partnering with disqualified persons, the ownership percentage must be kept constant throughout the life of the investment. All expenses and income must be split according to that ownership ratio, and each bill must be paid according to that ratio as well.

Unrelated Business Income Tax (UBIT) applies to profits made as a result of using leverage (loans) to invest in your property. It is your responsibility to calculate, report and pay this tax. However, your CPA or tax preparer may be able to help with the calculation. (Our sister company, IRA Tax Services, can assist as well. Visit www.irataxservices.com for more information on UBIT.)

There are no restrictions on the types of real estate you invest in, where the property is located, or the price and/or market value of the property. In order to have sufficient time for required compliance review and processing, New Direction IRA needs to have all completed paperwork 3 full business days prior to funding.

Although these guidelines are a great introduction into the procedures every investor must follow when investing in real estate with their self-directed IRA, they are far from exhaustive. A complete comprehensive guide to these policies and more details about IRA real estate tax benefits can be found on New Direction IRA’s website. Happy investing!

Real Estate and Investments for Retirement – Your Options

Real estate investing for retirement is becoming more and more popular as housing markets continue to stabilize. But, as with everything involving real estate and investments, you have to do your homework. Not only do you need to do your due diligence in buying and selling properties, but you also need to understand your tax and retirement responsibilities when using real estate investing for retirement.

Holding Your Real Estate Portfolio

Anyone can begin buying and selling real estate and plan on using the money for their retirement. However, without proper tax planning, you can get stuck with large tax bills that eat into your profits. Even if you are only paying the lower capital gains tax rate, you could be growing your real estate investments more tax efficiently in your Traditional or Roth IRA.  Contrary to popular belief, your IRA can invest in almost anything with the exceptions of life insurance and collectables.  Many people utilize real estate as a retirement asset because they know and understand real estate better than they understand the stock or bond market.  However, for someone looking for current income, it may not make sense in all situations to utilize the IRA.  Speak with your financial and tax professionals to determine what is best for your situation and particular asset.

Types of Real Estate Investments

While there are many ways to invest in real estate, the two most common real estate investments for retirement are buying rental properties that produce income and flipping properties in hopes of appreciation. Each type of real estate investment has a legitimate place. It may take a lot more skill and risk tolerance to successfully flip real estate, especially if you are using all of your assets. The amount of risk an investor takes with real estate and investments typically depends on how far away they are from retirement, their experience with real estate and their current mix of retirement asset types. 

Conclusion

If you are just starting out with real estate investing for retirement it can potentially make sense to begin conservatively. Beginning with a rental property that slowly that can produce income and could appreciate in value over time can be a better approach to real estate investing over short-term or speculative real estate transactions. The key to real estate investments is to steadily build wealth while maximizing income potential and taking advantage of tax breaks where you can.  Keep in mind that if you try to get rich overnight you are just as likely to lose everything.  Lastly, remember to perform your due diligence with all investments and to consult your financial and tax professionals.

If you’d like to learn more about real estate IRA investing, please contact the New Direction IRA business development team at 303-546-7930 x155 for a free consultation and links to great learning resources. 

Rental Real Estate Investment Education for IRA Investors

Is a rental real estate investment the best option for your self-directed IRA? The answer depends on each IRA investor’s unique circumstance. While some rental real estate investors appreciate they can “touch” their investment, others are stressed by the amount of responsibility that comes with being a landlord. Rental real estate investment education begins with understanding some of the finer points of the transaction before jumping in with both feet. Asking yourself some of the following questions can help you to gain a better understanding of whether or not rental real estate investing within a self-directed IRA is right for you.

·         What is my investment time horizon? Rental real estate is usually considered a long-term investment.  Unlike traditional stocks and bonds, rental real estate as an investment comes with maintenance expenses, taxes, and operating costs that can erode short-term returns.  

·         Does my IRA contain enough liquidity after I make my rental real estate investment? While real estate has the potential to increase in value over time and provide a steady income, certain economic times can make it difficult to rent or sell. Proper rental real estate education encourages investors to look beyond the initial property purchase price and take into account post-closing expenses when calculating necessary self-directed IRA account liquidity, especially if you are nearing the age when Required Minimum Distributions would be necessary.  As all expenses need to be paid directly by the IRA, cash shortfalls should be avoided.

·         Do I fully understand the local rental real estate market I intend to purchase from? Local rental real estate values often fluctuate. Rental real estate investment education for IRA investors often depends on local economic indicators of the specific region an intended investment is located. 

·         Am I prepared to become a more ‘hands off’ landlord?  Many rental real estate investors like the idea and/or the cost saving aspects of performing their own property maintenance and management.  When buying a property inside an IRA you are limited in the kind of services you can provide.  While you can still make managerial decisions (who to rent to, what color to paint the walls), you cannot provide any goods or services to the property which means no ‘sweat equity.’  

If you are considering rental real estate investments within your self-directed IRA, there is no right or wrong answer because it depends on your unique situation. Making time for real estate investment education can help you get started as a real estate investor or help you decide that type of investment isn’t suitable for you. It is always prudent to consult with your trusted tax, legal, and financial advisors to discuss all of your investment options before making a decision. If you’d like to learn more about real estate IRA investing, please contact the New Direction IRA business development team at 303-546-7930 x155 for free consultation and links to great learning resources. 

The Real Estate Developer Guide to Creative Real Estate IRA Investing

While many people want to use the power of a self-directed IRA for real estate investing, they often feel they can’t get started because they don’t have enough money in their plan. Thankfully, there are several creative ways to bring your real estate transaction to fruition even when your situation is less than perfect. Even if you are low on funds in your self-directed IRA you can still become a real estate investor. You just need to use some creative real estate investing techniques. While the IRS does have strict rules for self-directed IRA’s, it still allows for considerable flexibility in growing the plan’s assets.

Partner Up Instead of Going Alone

There is nothing to stop you from partnering with someone else when making self-directed IRA real estate investments. While you on your own may not be ready to become a real estate developer, there are many opportunities waiting for your investment. You can go in jointly with other IRA plans, investors, or even invest with companies that in turn invest in real estate. You can even partner with disqualified persons that you otherwise could not perform transactions with. Together you can jointly own property. Creative real estate tactics like partnering with others also gives you the chance to learn from more experienced investors. The rules governing IRAs require that you only pay fees and costs of the investment in proportion with the plan’s percentage of ownership in the property and receive the same percentage of the profits. If you are a 10% owner, your self-directed IRA must pay 10% of the fees and costs and receive only 10% of the profits.

Leveraging the Property

If you find yourself with a cash shortfall and no partners, you IRA could potentially take out a mortgage to increase purchasing power.  The IRS does allow you to leverage plan assets so long as it is not for personal use and the money is used to acquire further investments for your self-directed IRA. The best practice is to get a non-recourse loan, one that uses the property as collateral and keeps the lender from coming after you, your other assets, or the assets of the IRA in case of default. While these loans are more difficult to locate and acquire, for the creative real estate investor, they are still available.  It is important to note additional taxes may apply on the portion of profits derived from using leverage. 

Conclusion

Don’t let the idea that you don’t have enough money in your self-directed IRA keep you from starting your path as a real estate developer; you have options. Creative real estate investors can even transfer money from old 401(k) plans as well as employ other strategies such as investing in real estate related notes to grow their portfolios.  Start getting creative! If you’d like to learn more about real estate IRA investing, please contact the New Direction IRA business development team at 303-546-7930 x155 for a free consultation and links to great learning resources.

Real Estate Investing and IRA Prohibited Transactions

Using your self-directed IRA to hold your real estate investments can be an excellent way of both sheltering the investment from taxes and funding your retirement. The IRS gives some tremendous tax advantages IRAs; however, because of the advantages given they do ask you to follow their rules. The most common danger is inadvertently executing a prohibited transaction.  By learning what to avoid, you can safely and efficiently use real estate to grow your retirement account.

Disqualified Persons

A disqualified person is simply a person or entity the IRS doesn’t allow your self-directed IRA to have transactions with. The most common examples of a disqualified person are you, the IRA holder, your spouse, your parents, your grandparents, your children, your grandchildren or spouses of your children or grandchildren.  A disqualified person can also be a company or partnership that is owned or controlled by a disqualified person.  If you or another disqualified person will directly or indirectly benefit from the investment property you wish to hold in your self-directed IRA, you may want to reconsider the investment as a prohibited transaction is more likely to occur.

Types of Real Estate Prohibited Transactions

Common examples:

·         Holding a second home or vacation property within your self-directed IRA that is personally used by a disqualified person for any length of time.

·         Purchasing a rental property for a disqualified person to live in even if they pay rent to the IRA.

·         Using real estate in your IRA to secure a personal loan for you or another disqualified person.  

·         Lending money from the IRA to a disqualified person for a down payment on a home or other home expense.

·         Buying or selling a property between the IRA and a disqualified person.

·         A disqualified person performing maintenance, repairs or providing other ‘sweat equity’ on property owned by the IRA.

·         Paying an expense incurred by the IRA owned property out of personal funds.  Applies to all disqualified persons.

·         Personally collecting rents on behalf of the IRA and then ‘reimbursing’ the IRA.  All income needs to go directly to the IRA.

Conclusion

A self-directed IRA is a powerful tool for real estate investors. If the rules are followed you will benefit from the traditional tax advantages IRAs offer.  Understanding the rules regarding prohibited transactions and disqualified persons will allow you to avoid making a costly mistake and be able to grow your investments in a tax efficient manner.  If you have questions about a specific scenario, please reach out to a member of the New Direction IRA staff for clarification.

Make Money in Real Estate Using a Self-Directed Real Estate IRA

Have you ever wondered how people make money in real estate? While late night TV is filled with dozens of “get rich quick” real estate schemes, each one of these “new real estate secrets” are actually variations on the two most common strategies professional real estate investors use to make their money. Savvy investors know how to produce returns but they also know how to protect their investments. Because of the powerful tax benefits, holding real estate investments within a self-directed IRA account has the potential to produce above market returns. 

Strategy One: Rental Income

The first way many investors make money in real estate is to own property and have others pay them for using it. This could be residential property like a rental home or an apartment building. This could be a commercial building like a strip mall or office building. Even undeveloped land can be “leased” in the sense that others pay to exploit certain rights like water or mineral rights.  Erecting a mobile phone tower on vacant land is another way to get income from property. The key is to make more money in rent that you have to pay out in costs like property taxes and mortgage payments. Self-directed IRA’s can hold property that is rented to others. This allows the money to grow on a tax-deferred basis.

Strategy Two: Appreciation

The second strategy to making money in real estate is appreciation. This is the oldest way to make money at anything, buy low and sell high. Of course, real estate doesn’t always keep growing in value. You need skill to spot bargains and possess the wisdom to see future trends. Once again, a self-directed IRA is an excellent way of allowing your investments to grow instead of getting slowly eaten away by taxes. You can buy and hold properties in your self-directed IRA and if you want or need to sell a property, you can defer the income taxes on the sale. Generally speaking, taxes are only paid when a distribution is taken from the IRA; although certain taxable situations may apply when real estate assets are leveraged. Feel free to call our office if you’d like to learn more about this unique situations. 

Conclusion

Many successful retirees have used a combination of both methods to make money in real estate through self-directed IRA’s. They have bought rental properties that paid for themselves. The IRA held the property while it gradually appreciated and the wise investors eventually sold the property for a big cash payout, all while the profits grew in a tax deferred self-directed IRA.  Find the strategy or combination of strategies that works best for you and start taking control of your retirement. If you’d like to learn more about real estate IRA investing, please contact the New Direction IRA business development team at 303-546-7930 x155 for a free consultation and links to great learning resources.

Real Estate Investing with a Self-Directed IRA Custodian

Once an investor considers holding real estate in his or her IRA, it is important to take the first step and discover whether or not the current IRA custodian will even allow real estate to be held as an investment. Often, investors must move to a self-directed IRA custodian because their current provider either will not work with real estate or has little experience with holding real estate in an IRA. The name self-directed IRA can be a little confusing because many traditional brokerage custodians offer a “self directed IRA” for investing. The trick to comparing providers is finding out if their plans are only eligible for investments into securities like stocks, bonds, and mutual funds. The key is to find an IRA custodian that will handle real estate and other alternative investments. New Direction IRA provides real estate investors with plan options that make real estate ira investing easier than most. 

It is incredibly important for any self-directed IRA real estate investor to understand that choosing an experienced IRA custodian, large or small, can have a major impact on investment outcomes. Some qualities to look for in a capable self-directed IRA custodian:

• Size does not always matter. When it comes to self-directed IRA custodians, working with a large investment company does not mean that company has any experience managing self-directed IRA real estate assets. Look for a company that specializes in what you’re looking to accomplish.
• They have a firm understanding of IRS rules and are willing to educate you. As an example, a capable self-directed IRA custodian should be willing and able to explain IRS guidelines and help you learn about the processes, timelines, and tax implications of making real estate investments in a variety of structures. 
• Client Service is more than just a sales hook. Real estate investing with a self-directed IRA custodian is generally a do-it-yourself approach, requiring that you make decisions and execute actions. Finding a self directed ira custodian that offers great client service can make a world of difference because your investment instructions to the custodian may be processed slowly or not at all if client service isn’t up to par. Find out if you receive a dedicated representative when opening your self-directed ira for real estate investing. 
• Technology is important but not common. The self-directed IRA industry has historically been behind the times from a technology perspective and many still use paper forms to complete administrative actions such as paying real estate related expenses. Finding an IRA custodian that offers competent technology is an important consideration. Do they offer online form processing, free online bill pay, or real time communications for pending transactions? The paperwork process involved in real estate investing is intensive and it’s important that technology be leveraged to make sure all parties are constantly on the same page. 
• Will they save you from yourself? Self-directed IRA real estate investing comes with an entire playbook of rules. Sometimes investors make decisions that unwittingly go against these rules and are hit with penalties if audited by the IRS. Choosing a self-directed IRA custodian that will recognize prohibited transactions before they happen is incredibly beneficial.

At New Direction IRA, we encourage anyone considering a real estate investment within a self-directed IRA to reach out and discuss any questions with our knowledgeable staff. We’re happy to take the time if you call us at 877-742-1270.