Wednesday, October 7, 2015

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!