tag:blogger.com,1999:blog-77884119666232498292024-03-05T00:59:23.646-08:00Real Estate IRA BlogAnonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comBlogger34125tag:blogger.com,1999:blog-7788411966623249829.post-72438325166599805262015-10-07T14:10:00.001-07:002015-10-07T14:10:42.667-07:00Real Estate IRA Wholesaling: the Simplest and Least-Expensive Way to Invest in Real Estate<div class="MsoNormal" style="text-align: left;">
<span style="color: #0c343d; font-family: Arial, Helvetica, sans-serif;">Patricia McCrystal</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjv4TQIEnHqmOvX5TgPpP0K06komsHa4P9529LOStWE1dCnDpfNoYIhkh77TwBaZP4ovZp5a6pZIeFFRdudlPtilok2eYG8NC4jcKojLqNqPmbvDRVSQHhePnE9A6iE3GZJQdN_jkjn9hc/s1600/big+house+with+grass+and+sky.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="264" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjv4TQIEnHqmOvX5TgPpP0K06komsHa4P9529LOStWE1dCnDpfNoYIhkh77TwBaZP4ovZp5a6pZIeFFRdudlPtilok2eYG8NC4jcKojLqNqPmbvDRVSQHhePnE9A6iE3GZJQdN_jkjn9hc/s320/big+house+with+grass+and+sky.jpg" width="320" /></a><span style="color: #0c343d; font-family: Arial, Helvetica, sans-serif;">October 7, 2015</span></div>
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<span style="text-indent: 0.5in;"><span style="font-family: Arial, Helvetica, sans-serif;">Whether you’re a seasoned wholesale real estate investor or
are simply interested in trying your hand in the market, using your <a href="https://newdirectionira.com/what-is-ira.php" target="_blank">IRA accoun</a>t
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.</span></span></div>
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<span style="text-indent: 0.5in;"><span style="font-family: Arial, Helvetica, sans-serif;">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.</span></span></div>
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<span style="text-indent: 0.5in;"><span style="font-family: Arial, Helvetica, sans-serif;">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!</span></span></div>
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<span style="text-indent: 0.5in;"><span style="font-family: Arial, Helvetica, sans-serif;">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 <a href="https://newdirectionira.com/ira-disqualified-person.php" target="_blank">(beware ofdisqualified persons rules)</a>. Click here to learn more about the different types
of IRA accounts.</span></span></div>
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<span style="text-indent: 0.5in;"><span style="font-family: Arial, Helvetica, sans-serif;">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 <a href="https://newdirectionira.com/" target="_blank">New Direction IRA</a>, 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!</span></span></div>
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Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-3580900806354501072015-10-07T13:54:00.005-07:002015-10-07T14:11:33.433-07:00Increase Cash Flow and Equity in Retirement by Leveraging Real Estate in Your IRA!<div align="center" class="MsoNormal" style="text-align: center;">
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<span style="color: #073763;">P<span style="font-family: Arial, Helvetica, sans-serif;">atricia McCrystal<o:p></o:p></span></span></div>
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<span style="color: #073763; font-family: Arial, Helvetica, sans-serif;">October 7th, 2015</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi59DPYW58ClZIIYIWPLyThUx05725pivK2xOwCKZwubrtJ7-X7Yzy7fUcqsBbxSs4EXgtzC168NJJsOSmjQeZGAMxvhC6tAlrJZkMebpNltidNKv02l557weI70jYrMXhFwDfiU_DeunbW/s1600/RE+Collage.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="128" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi59DPYW58ClZIIYIWPLyThUx05725pivK2xOwCKZwubrtJ7-X7Yzy7fUcqsBbxSs4EXgtzC168NJJsOSmjQeZGAMxvhC6tAlrJZkMebpNltidNKv02l557weI70jYrMXhFwDfiU_DeunbW/s640/RE+Collage.jpg" width="640" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Many real estate investors turn to <a href="https://newdirectionira.com/what_is_self_directed_ira.php" target="_blank">self-directed IRA</a>s 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.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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.<o:p></o:p></span></div>
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<b><span style="font-family: Arial, Helvetica, sans-serif;">Reasons IRA Real Estate
investors may use leverage to purchase multiple properties:</span></b></div>
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<li><span style="font-family: Arial, Helvetica, sans-serif; text-indent: -0.25in;">After expenses, an investor can potentially
accrue more net profits on a monthly basis with three properties rather than
just one.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; text-indent: -0.25in;">The tenants of each property will be paying your
mortgage through rent payments, in addition to building equity for you.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; text-indent: -0.25in;">You can use your properties’ cash flow to reduce
your debt and therefore accelerate the payoff of your IRA’s loan.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; text-indent: -0.25in;">If the property value of each investment
appreciates, you can gain three times the income flow that you would with only
one property.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; text-indent: -0.25in;">If you are able to pay off any of your mortgage
loans completely, your monthly cash flow in retirement increases dramatically.</span></li>
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<span style="font-family: Arial, Helvetica, sans-serif;">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 )<span class="MsoCommentReference"><span style="font-size: 8.0pt; line-height: 115%;">, </span></span><span class="MsoCommentReference"><span style="line-height: 115%; mso-ansi-font-size: 11.0pt; mso-bidi-font-size: 11.0pt;">and t</span></span>he 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.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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 <a href="https://newdirectionira.com/" target="_blank">NewDirection IRA </a>toll free at 877-742-1270 to learn more about leveraging your IRA
real estate investments, and as always, happy investing!</span><o:p></o:p></div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-10745994412782906602015-07-24T12:47:00.000-07:002015-07-30T14:18:41.048-07:00New Direction CEO Bill Humphrey Talks Real Estate Investing for Retirement on RE/MAX of Boulder Podcast<div class="MsoNoSpacing">
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<span style="font-family: Arial, Helvetica, sans-serif;">Patricia M<u>c</u>Crystal<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">July 14, 2015<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Monday, July 13<sup>th</sup> 2015 – In a <a href="https://www.youtube.com/watch?v=DU6I7BT2YFA" target="_blank">podcast</a> 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. <o:p></o:p></span></div>
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<tr><td class="tr-caption" style="text-align: center;">Left to Right: Duane Duggan and Bill Humphrey</td></tr>
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<span style="font-family: Arial, Helvetica, sans-serif;">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”.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“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.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“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.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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.”<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">You can watch the full podcast on Boulder Property Network’s </span><a href="https://www.youtube.com/watch?v=DU6I7BT2YFA" style="font-family: Arial, Helvetica, sans-serif;" target="_blank">YouTube</a><span style="font-family: Arial, Helvetica, sans-serif;"> site, and read RE/MAX of Boulder's blog about the podcast <a href="http://www.boulderco.com/blog/remax-of-boulder-podcast-uncle-ira-can-invest-in-real-estate.html" target="_blank">here</a>. Visit </span><a href="https://newdirectionira.com/" style="font-family: Arial, Helvetica, sans-serif;" target="_blank">New Direction IRA.com</a><span style="font-family: Arial, Helvetica, sans-serif;"> to learn more about how to
start investing in real estate with your self-directed IRA today!</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBNWHwa6AFXM0dugEiBlB4N9HL6WuqU-ppUGsdUW2x4-pgpddYfn92ZqeF2De10133AXsXkEjI4wN9aVV5yMGSTsM6Bu5dq30oY0ynrLa44sMys7RAh5c87_TbQaLluCNQ_nqD51ArxfJs/s1600/Bill+podcast.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><br /></a></span><o:p></o:p></div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.com1070 West Century Drive #101, Louisville, CO 80027, USA39.9683603 -105.1656851999999815.3294328 -146.47427919999998 64.6072878 -63.857091199999985tag:blogger.com,1999:blog-7788411966623249829.post-23848306006120014792015-07-10T14:33:00.003-07:002015-08-12T08:39:31.493-07:00Become a First-Time Homeowner, Thanks to Your IRA (Even if You’ve Owned a Home Before)<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: left;">
<span style="color: #134f5c; font-family: Arial, Helvetica, sans-serif;"><span style="font-size: 10pt; line-height: 115%;">Patricia M</span><u style="font-size: 10pt; line-height: 115%;">c</u><span style="font-size: 10pt; line-height: 115%;">Crystal</span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10.0pt; line-height: 115%;"><span style="color: #134f5c;">July 10th, 2015</span><o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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. </span><span style="font-family: Arial, Helvetica, sans-serif;">Plus, you’ll finally be able to paint the walls!</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUcpJ8RQM9UvvD4vT3ik02r3M4YO86RZfUo9znRXlqtdp6i8rez9R9SRPv81A0ml-nH_ueNQvZneZWVFtG3Cn8AlTgTBcwAWd3wcMIuH09Pt_Sdbb1ZrPDT4eYOnVPackvtQr9Ao2dXmNU/s1600/15147395_s.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUcpJ8RQM9UvvD4vT3ik02r3M4YO86RZfUo9znRXlqtdp6i8rez9R9SRPv81A0ml-nH_ueNQvZneZWVFtG3Cn8AlTgTBcwAWd3wcMIuH09Pt_Sdbb1ZrPDT4eYOnVPackvtQr9Ao2dXmNU/s320/15147395_s.jpg" width="320" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">However, IRA account owners are permitted to withdraw money before
distribution age, penalty-free, <i>in
certain circumstances</i> – in this case, IRA owners can withdraw up to $10,000
for <i>qualified acquisition costs</i> 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. <o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Additionally, you can qualify as a first-time home buyer <i>even if you’ve owned a home before.</i> 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. <o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">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!</span><o:p></o:p></div>
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Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.com1070 West Century Drive #101, Louisville, CO 80027, USA39.9683603 -105.1656851999999815.3294328 -146.47427919999998 64.6072878 -63.857091199999985tag:blogger.com,1999:blog-7788411966623249829.post-89103881931613383812015-06-25T13:31:00.000-07:002015-09-17T12:24:34.998-07:00Titling Your IRA Real Estate Investment: Avoid Missteps to Save Time & Money<div style="text-align: left;">
<h3 style="text-align: center;">
<span style="color: #3d85c6; font-family: Arial, Helvetica, sans-serif;">To Enjoy IRA Real Estate Tax Benefits, be Mindful of Costly Titling Mistakes.</span></h3>
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<div style="text-align: left;">
<span style="color: #3d85c6; font-family: Arial, Helvetica, sans-serif; font-size: x-small;">Patricia M</span><span style="color: #3d85c6; font-family: Arial, Helvetica, sans-serif; font-size: x-small;">c</span><span style="color: #3d85c6; font-family: Arial, Helvetica, sans-serif; font-size: x-small;">Crystal</span></div>
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<span style="color: #3d85c6; font-family: Arial, Helvetica, sans-serif; font-size: x-small;">June 25, 2015</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhqK4vvsge0I26p0TUmsWw4INSCYTtU-wXAYIdxAoqmC_1_hKN1631HTE6ZgWJK90Q5SY2UZ2TWNaul3FZTSN_ss8yyrk44pC0tVwYxL0qnrTpjs7kiQRnOMilt0OR97P3CK4RwnkVRFWQo/s1600/31007995_m.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="265" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhqK4vvsge0I26p0TUmsWw4INSCYTtU-wXAYIdxAoqmC_1_hKN1631HTE6ZgWJK90Q5SY2UZ2TWNaul3FZTSN_ss8yyrk44pC0tVwYxL0qnrTpjs7kiQRnOMilt0OR97P3CK4RwnkVRFWQo/s400/31007995_m.jpg" width="400" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">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.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">You plan to use your <a href="https://newdirectionira.com/what-is-ira.php" target="_blank">self-directed IRA</a> 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.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">You contact your self-directed IRA administrator, <a href="https://newdirectionira.com/" target="_blank">New Direction IRA,</a> 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.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">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.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">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. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">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.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">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.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">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.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">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.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">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.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="https://newdirectionira.com/ubit-ubti.php" target="_blank">Unrelated Business Income Tax </a>(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.)</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">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.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">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 <a href="https://newdirectionira.com/real_estate_ira.php" target="_blank">website</a>. Happy investing!</span><br />
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Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.com1070 West Century Drive #101, Louisville, CO 80027, USA39.9683603 -105.1656851999999815.3294328 -146.47427919999998 64.6072878 -63.857091199999985tag:blogger.com,1999:blog-7788411966623249829.post-30936299362038084552015-02-09T04:00:00.000-08:002015-02-09T04:00:05.572-08:00Real Estate and Investments for Retirement – Your Options<div class="MsoNoSpacing" style="font-family: Calibri, sans-serif; font-size: 11pt; margin: 0in 0in 0.0001pt;">
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 <a href="https://newdirectionira.com/new-direction-ira-due.php">due diligence</a> in buying and selling properties, but you also need to understand your tax and retirement responsibilities when using real estate investing for retirement.<o:p></o:p></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLAC0bi-40v3Pphypy2GIUpaof6V5hUUA2IxtjQD4zqK0Kmme6GGVpfJPgAsLDWcw4-2g7yiI5f-M_mq0vGGVcy8n8kho1Mv5Ym5HvTT8bPZrOdKxL4HV3W0ky6RV1EZWb5yT7EjRZE4J9/s1600/real-_estate_ira-3.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLAC0bi-40v3Pphypy2GIUpaof6V5hUUA2IxtjQD4zqK0Kmme6GGVpfJPgAsLDWcw4-2g7yiI5f-M_mq0vGGVcy8n8kho1Mv5Ym5HvTT8bPZrOdKxL4HV3W0ky6RV1EZWb5yT7EjRZE4J9/s1600/real-_estate_ira-3.jpg" height="135" width="400" /></a></div>
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Holding Your Real Estate Portfolio<o:p></o:p></h2>
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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 <a href="https://newdirectionira.com/traditional-ira.php">Traditional</a> or <a href="https://newdirectionira.com/roth-ira.php">Roth IRA</a>. Contrary to popular belief, your IRA can invest in almost anything with the exceptions of life insurance and collectables. Many people utilize <a href="https://newdirectionira.com/real_estate_ira.php">real estate</a> 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 <a href="https://newdirectionira.com/real_estate_ira_loan.php">IRA</a>. Speak with your financial and tax professionals to determine what is best for your situation and particular asset.<o:p></o:p></div>
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Types of Real Estate Investments<o:p></o:p></h2>
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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. <o:p></o:p></div>
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<b><span style="color: #4f81bd; font-size: 13pt; line-height: 18.373332977294922px;">Conclusion<o:p></o:p></span></b></h1>
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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.<o:p></o:p></div>
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If you’d like to learn more about real estate IRA investing, please contact the <a href="https://newdirectionira.com/">New Direction IRA</a> business development team at 303-546-7930 x155 for a free consultation and links to great learning resources. </div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-1979381905314741742015-02-03T04:00:00.000-08:002015-02-03T04:00:12.019-08:00Rental Real Estate Investment Education for IRA Investors<div class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 11pt; margin: 0in 0in 0.0001pt;">
Is a rental real estate investment the best option for your <a href="https://newdirectionira.com/what_is_self_directed_ira.php">self-directed IRA</a>? 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 <a href="https://newdirectionira.com/real_estate_ira.php">real estate</a> investing within a self-directed IRA is right for you.<o:p></o:p></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEid5Jiyuwe6OHznfM2eKpzysXLhl7-ddb7Wk0VF2aeWcK_9NRkJGcJWAcahD0iUZl2MLuoFqqMygE7AYnEi8Db0JDElrzvji4mO2f3zpKHKIR-jl_F0e5opruzPHSivqey1VZiNZNI5Z1o4/s1600/real-_estate_ira.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEid5Jiyuwe6OHznfM2eKpzysXLhl7-ddb7Wk0VF2aeWcK_9NRkJGcJWAcahD0iUZl2MLuoFqqMygE7AYnEi8Db0JDElrzvji4mO2f3zpKHKIR-jl_F0e5opruzPHSivqey1VZiNZNI5Z1o4/s1600/real-_estate_ira.jpg" height="101" width="400" /></a></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><b>What is my investment time horizon?</b> 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. <o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><b>Does my IRA contain enough liquidity after I make my rental real estate investment? </b>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 <a href="https://newdirectionira.com/">self-directed IRA account</a> 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.<o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><b>Do I fully understand the local rental real estate market I intend to purchase from</b>? 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. <o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><b>Am I prepared to become a more ‘hands off’ landlord? </b>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 ‘<a href="https://newdirectionira.com/ira-disqualified-person.php">sweat equity</a>.’ <o:p></o:p></div>
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If you are considering rental real estate investments within your <a href="https://newdirectionira.com/self-directed-ira.php">self-directed IRA</a>, 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. </div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-91836012233517599892015-01-30T04:00:00.000-08:002015-01-30T04:00:05.123-08:00The Real Estate Developer Guide to Creative Real Estate IRA Investing<div class="MsoNoSpacing" style="font-family: Calibri, sans-serif; font-size: 11pt; margin: 0in 0in 0.0001pt;">
While many people want to use the power of a self-directed IRA for <a href="https://newdirectionira.com/real_estate_ira.php">real estate</a> 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 <a href="https://newdirectionira.com/">self-directed IRA’s</a>, it still allows for considerable flexibility in growing the plan’s assets.<o:p></o:p></div>
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<span style="color: #4f81bd;">Partner Up Instead of Going Alone<o:p></o:p></span></h1>
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There is nothing to stop you from partnering with someone else when making <a href="https://newdirectionira.com/self-directed-ira.php">self-directed IRA</a> 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 <a href="https://newdirectionira.com/ira-disqualified-person.php">disqualified persons</a> 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.<o:p></o:p></div>
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<span style="color: #4f81bd;">Leveraging the Property<o:p></o:p></span></h1>
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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 <a href="https://newdirectionira.com/real_estate_ira_loan.php">leverage plan assets</a> 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. <o:p></o:p></div>
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<span style="color: #4f81bd;">Conclusion<o:p></o:p></span></h1>
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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 <a href="https://newdirectionira.com/">New Direction IRA</a> business development team at 303-546-7930 x155 for a free consultation and links to great learning resources.</div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-20446617887694228252015-01-27T08:17:00.000-08:002015-01-27T08:17:58.815-08:00Real Estate Investing and IRA Prohibited Transactions<div class="MsoNoSpacing" style="font-family: Calibri, sans-serif; font-size: 11pt; margin: 0in 0in 0.0001pt;">
Using your <a href="https://newdirectionira.com/what_is_self_directed_ira.php">self-directed IRA</a> to hold your <a href="https://newdirectionira.com/real_estate_ira.php">real estate</a> 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.<o:p></o:p></div>
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Disqualified Persons<o:p></o:p></h1>
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A <a href="https://newdirectionira.com/ira-disqualified-person.php">disqualified person</a> 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.<o:p></o:p></div>
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Types of Real Estate Prohibited Transactions<o:p></o:p></h1>
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Common examples:<o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span></span>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.<o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span></span>Purchasing a rental property for a disqualified person to live in even if they pay rent to the IRA.<o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span></span>Using real estate in your IRA to secure a personal loan for you or another disqualified person. <o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span></span>Lending money from the IRA to a disqualified person for a down payment on a home or other home expense.<o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span></span>Buying or selling a property between the IRA and a disqualified person.<o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span></span>A disqualified person performing maintenance, repairs or providing other ‘sweat equity’ on property owned by the IRA.<o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span></span>Paying an expense incurred by the IRA owned property out of personal funds. Applies to all disqualified persons.<o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span></span>Personally collecting rents on behalf of the IRA and then ‘reimbursing’ the IRA. All income needs to go directly to the IRA.<o:p></o:p></div>
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Conclusion<o:p></o:p></h1>
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A <a href="https://newdirectionira.com/">self-directed IRA</a> 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 <a href="https://newdirectionira.com/">New Direction IRA</a> staff for clarification.</div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-81955573641960559432015-01-26T05:00:00.000-08:002015-01-27T08:19:49.321-08:00Make Money in Real Estate Using a Self-Directed Real Estate IRA<div class="MsoNoSpacing" style="font-family: Calibri, sans-serif; font-size: 11pt; margin: 0in 0in 0.0001pt;">
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. <o:p></o:p></div>
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<span style="color: #4f81bd;">Strategy One: Rental Income<o:p></o:p></span></h1>
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The first way many investors make money in <a href="https://newdirectionira.com/real_estate_ira.php">real estate</a> 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. <a href="https://newdirectionira.com/self-directed-ira.php">Self-directed IRA’s</a> can hold property that is rented to others. This allows the money to grow on a tax-deferred basis.<o:p></o:p></div>
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<span style="color: #4f81bd;">Strategy Two: Appreciation<o:p></o:p></span></h1>
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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 <a href="https://newdirectionira.com/real_estate_ira_loan.php">real estate assets are leveraged</a>. Feel free to call our office if you’d like to learn more about this unique situations. <o:p></o:p></div>
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<span style="color: #4f81bd;">Conclusion<o:p></o:p></span></h1>
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Many successful retirees have used a combination of both methods to make money in real estate through <a href="https://newdirectionira.com/">self-directed IRA’s</a>. 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 <a href="https://newdirectionira.com/">New Direction IRA</a> business development team at 303-546-7930 x155 for a free consultation and links to great learning resources.</div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-21313720941166007242015-01-19T12:57:00.000-08:002015-01-19T12:57:12.481-08:00Real Estate Investing with a Self-Directed IRA Custodian<div class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 11pt; margin: 0in 0in 0.0001pt;">
Once an investor considers holding <a href="https://newdirectionira.com/real_estate_ira.php">real estate in his or her IRA</a>, 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. <o:p></o:p><br />
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<span style="font-size: 11pt;">It is incredibly important for any self-directed IRA real estate investor to understand that choosing an experienced <a href="https://newdirectionira.com/">IRA custodian</a>, large or small, can have a major impact on investment outcomes. Some qualities to look for in a capable self-directed IRA custodian:</span><br />
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<li style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px;"><b style="font-size: 11pt; text-indent: -0.25in;">Size does not always matter.</b><span style="font-size: 11pt; text-indent: -0.25in;"> When it comes to <a href="https://newdirectionira.com/new-direction-ira-custodian.php">self-directed IRA custodians</a>, 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.</span></li>
<li><b style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;">They have a firm understanding of IRS rules and are willing to educate you</b><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;">. 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.</span><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;"> </span></li>
<li><b style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;">Client Service is more than just a sales hook. </b><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;">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.</span><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;"> </span></li>
<li><b style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;">Technology is important but not common. </b><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;">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.</span><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;"> </span></li>
<li><b style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;">Will they save you from yourself?</b><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;"> </span><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 15.399999618530273px; text-indent: -0.25in;"><a href="https://newdirectionira.com/self-directed-ira.php">Self-directed IRA</a> 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 <a href="https://newdirectionira.com/ira-disqualified-person.php">prohibited transactions</a> before they happen is incredibly beneficial.</span></li>
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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.</div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-86109047522091128342014-12-31T07:58:00.002-08:002014-12-31T07:58:09.281-08:00Using a Real Estate Self Directed IRA to Make Real Estate Income<div class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 11pt; margin: 0in 0in 0.0001pt;">
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 <a href="https://newdirectionira.com/real_estate_ira.php">real estate in a self-directed IRA</a>, investment returns can be sheltered under the tax-advantaged umbrella associated with retirement plans. A <a href="https://newdirectionira.com/what_is_self_directed_ira.php">self directed IRA</a> removes one major real estate profit loss – taxes on capital gains. </div>
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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:<o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><b>Am I able to manage the property myself and be “landlord”? </b>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. <o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><b>Does my IRA have a large pool of available liquidity?</b> 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. <o:p></o:p></div>
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<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><b>Is my plan to rent or lease my real estate to the general public?</b> 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 <a href="https://newdirectionira.com/ira.html">IRA</a>. Any real estate income received under the qualified umbrella of an IRA must be from a disinterested third party. <o:p></o:p></div>
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Holding real estate in a <a href="https://newdirectionira.com/self-directed-ira.php">self-directed IRA</a> 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. <o:p></o:p></div>
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Not all IRA providers are created equal and the vast majority have no experience whatsoever with self-directed IRA real estate transactions. <a href="https://newdirectionira.com/"><b>New Direction IRA</b></a> 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.</div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-42868888039099590322014-10-08T07:58:00.000-07:002014-10-08T07:58:54.559-07:00Ways to invest in Real Estate with your IRA<div class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 11pt; margin: 0in 0in 0.0001pt;">
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, <a href="http://newdirectionira.com/what_is_self_directed_ira.php">Self-Directed IRA</a>s 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.<o:p></o:p></div>
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The most common means of <a href="http://newdirectionira.com/real_estate_ira.php">investing in real estate</a> 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 <a href="http://newdirectionira.com/what-is-ira.php">IRA</a> 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.<o:p></o:p></div>
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<a href="http://newdirectionira.com/">SDIRA</a>s can also invest in real estate indirectly. Your account can buy private stock in an entity which purchases and owns <a href="http://newdirectionira.com/real_estate_ira.php">real estate</a>. 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.<o:p></o:p></div>
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An SDIRA can offer the flexibility of investing in all different types of real estate. Your IRA can purchase residential <a href="http://newdirectionira.com/real_estate_ira.php">real estate</a>, 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.<o:p></o:p></div>
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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.<o:p></o:p></div>
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For individuals who want to incorporate real estate investing into their retirement plan, a <a href="http://newdirectionira.com/">Self-Directed IRA</a> 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. <a href="http://newdirectionira.com/">New Direction IRA</a> is here to offer the education and resources that can help you make the best decisions for your retirement investing.</div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-66242687853575832422014-07-28T07:46:00.000-07:002014-07-28T07:46:47.066-07:00Real Estate IRA Key Strategies<div style="font-size: 12px;">
Many <a href="http://newdirectionira.com/what_is_self_directed_ira.php">self directed IRA</a> 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.</div>
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IRAs can invest in many types of <a href="http://newdirectionira.com/real_estate_ira.php">real estate</a>, 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. </div>
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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 <a href="http://newdirectionira.com/single-member-llc.php">LLC</a>. 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.</div>
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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 <a href="http://newdirectionira.com/ira-disqualified-person.php">disqualified persons</a> cannot personally use or perform any improvements on the property.</div>
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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.</div>
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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.</div>
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<a href="http://newdirectionira.com/self-directed-ira.php">Self directed IRA</a> 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.</div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-9364674237379145042014-04-16T05:00:00.000-07:002014-05-27T07:52:11.158-07:00Real Estate IRA Fees<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXDlNPAzcj-fue-kUwEbdwk_TDvULLadZjpcDH3LviMNB8LEQKWwG7AcRx_i_mX3KgwcmMvB3Df_LMY_CmWwGqnjz2fkkDH2ruKJv0HoH3rLWycrhm8-fytp7a60tqSXjBMB2_wjEGOroy/s1600/real_estate_ira-2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="real estate ira, real estate ira fees, ira fees, sdira fees" border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXDlNPAzcj-fue-kUwEbdwk_TDvULLadZjpcDH3LviMNB8LEQKWwG7AcRx_i_mX3KgwcmMvB3Df_LMY_CmWwGqnjz2fkkDH2ruKJv0HoH3rLWycrhm8-fytp7a60tqSXjBMB2_wjEGOroy/s1600/real_estate_ira-2.jpg" title="Real Estate IRA Fees" /></a></div>
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One of the main reasons people think <a href="http://www.newdirectionira.com/what_is_self_directed_ira.php">Self-Directed IRAs</a> aren’t worthwhile is because of the fees associated with them. However, <a href="http://www.newdirectionira.com/fees.php">the fees </a>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.<br />
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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.<br />
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Let’s look at our <a href="http://www.newdirectionira.com/fees.php">NDIRA real estate IRA fees</a>, which includes FREE online bill pay:<br />
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Application Fee: $50 (One time only when an IRA is opened)<br />
Transaction Fee: $250 (Per purchase/sale/exchange of real estate)<br />
Annual Fee Per Property: $295 (Other fee options available) <br />
Bank Wire: $30 (Per outgoing wire) <br />
Overnight mail: $30 (Per mailing)<br />
Outgoing check fee: $10 (Per check we print and mail.)<br />
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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 <a href="http://www.ndira.com/">NDIRA</a> works on commission nor do we sell investments so we are really working for you.<br />
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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. <br />
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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.<br />
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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 <a href="http://www.newdirectionira.com/real_estate_ira.php">http://www.newdirectionira.com/real_estate_ira.php.</a>Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-10435122743720655222013-12-30T08:05:00.000-08:002013-12-30T08:05:00.871-08:00Real Estate IRA Investing FAQ<b>Can I buy real estate in my Retirement Plan?</b><br />
<br />Yes, the IRS actually places very few limits on what you may buy with your IRA retirement funds. It is your IRA custodian who has put those limits on your retirement account. Truly self-directed IRAs allow you, the investor, to choose your investments. <br /><br />
<b>Can I borrow funds to buy real estate in my IRA? Can my IRA get a mortgage?</b><br /><br />
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<tr><td class="tr-caption" style="text-align: center;">IRAs can invest in all types of real estate!</td></tr>
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Yes, many banks have discovered the demand by IRA owners to finance real estate purchases in their IRAs. Banks continue to develop products specifically for IRAs and other plans. You’ll need a non-recourse loan, which tend to have higher down payment requirements than those for personal homes, but these loan types are available at many banks.<br /><br />
<b>Do I need an LLC to purchase real estate with my IRA?</b><br /><br />
An LLC may be used to purchase real estate, but it is not required. Your IRA can purchase a property in the very same way as you would personally. This is the most common way real estate is purchased and in this situation the property is simply titled to your IRA.<br /><b> </b><br />
<b>Do I need to use a special broker and title company?</b><br /><br />
No special broker or title company are required—you can use the same ones you used to buy your current home or any other broker. However, using a broker that is familiar with this process may be helpful buy it is not required.<br /><b> </b><br />
<b>Can I repair the property myself?</b><br />
<br />You may not personally do any work on the property and neither can any other disqualified persons (IRA holder, his spouse, his parents and grandparents, children and grandchildren, their spouses, certain fiduciaries and any entity owned or operated by a disqualified person. Work can be done by anyone else and you still have control over what you want them to do. For instance, you can’t personally paint the walls but you can tell the painter how you want the house painted.<br /><b> </b><br />
<b>Can I partner my IRA with my personal funds? Who else can I partner with?</b><br /><br />
If you cannot afford the investment property you are interested in you have many options. One option is to partner with yourself. For example your IRA can own 50% and you can personally own 50% (note: even if you personally own 99% of the property you are still prohibited from living in it or using the property.) You may also partner with someone else’s personal or IRA funds; the disqualified persons rule does not apply here so you may partner with your spouse, parent, child, friend, or whomever. There is no limit to how many people you can partner with. The percent of ownership cannot be changed once the investment is made.<br /><b> </b><br />
<b>Do I have to pay capital gains taxes if I sell the property?</b><br />
<br />Because the property is owned within a tax deferred (Traditional IRA) or tax free (ROTH IRA) plan no capital gains taxes need to be paid.<br />
<br /><b>Can I take property as a distribution and then live in it?</b><br />
<br />Yes, after you reach 59.5 years of age you may choose to take the property as a distribution from your IRA. Once the property is 100 percent in your possession, you are free to use the property as you wish.<br /><br />Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-29779866659698161042013-11-07T13:14:00.000-08:002013-11-13T08:40:25.005-08:00Unrelated Business Income Tax (UBIT): What is it and Why you should embrace it<div style="text-align: right;">
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<tr><td class="tr-caption" style="text-align: center;">UBIT may be an indicator of investment profits</td></tr>
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If there ever was a subject that will stop an accountant is his or her tracks it is <a href="http://newdirectionira.com/ubit-ubti.html">UBIT, which stands for unrelated business income tax</a>. Many investors shy away from certain IRA investments out of fear that UBIT will take out a big chunk of their earnings. But the truth is that these<a href="http://newdirectionira.com/ira_ubit-education.html"> investors are misinformed about the tax</a>.<br />
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To start, UBIT was initially placed on some taxpayers to “level the playing field” for certain businesses. The best example of how UBIT is used is for the competition between a non-profit and a for-profit enterprise. The college bookstore sells books to students and others within the structure of their “non-profit” umbrella. The college bookstore, because it is non-profit, is not taxed the same way as a for-profit enterprise. A non-profit does not pay taxes on most operations and therefore can afford to sell books at a lower cost than the for-profit store across the street. Since both the college bookstore and the for-profit bookstore are competing for the same customers, the college bookstore has the advantage of being treated differently for tax purposes and the advantage of this preferential tax treatment may allow the college bookstore to sell their books for less, thus attracting customers away from the for-profit store.<br />
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This is where UBIT comes into play. The government has placed a tax burden on the non-profit enterprise for running a business, i.e. selling books, under the main business of running a college. This same philosophy and set of rules is applied to an IRA’s investment in real estate when there is debt related to the purchase of that real estate. So what is bothering the accountants among us?<br />
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<ul>
<li>The tax rate for UBIT is high, ranging from 26% to 34%.</li>
<li>Calculation of this tax is, for those not familiar with the rules, complicated.</li>
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These issues are resolved, however, when the investor realizes that the tax allows for greater for overall gains because the account is allowed to use debt-leverage. A good <a href="http://newdirectionira.com/what_is_self_directed_ira.html">Self-Directed IRA provider</a> will be able to clear up any questions about calculating UBIT and make the process easy.<br />
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When debating the pros and cons of using leverage within an IRA to purchase an income property, the questions should never be “How do I avoid UBIT?” but rather “How much will the IRA grow using debt leverage and paying UBIT?” and “What is the resulting rate of return within my IRA?” The other due diligence items such as physical condition of the property as well as questions on the ability of the cash<br />
stream to service the loan and pay expenses, including UBIT, should also be taken into consideration. <br />
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Dismissing an investment because of the potential payment of taxes should never be a deal killer. Consult with your legal and tax advisors regarding investments involving potential UBIT within your IRA.<br />
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For information or videos about UBIT and other self-directed IRA issues, visit www.newdirectionira.com. Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-47828068777665011462013-10-28T05:30:00.000-07:002013-10-28T05:30:00.808-07:00Purchasing a vacation home with your IRA/401k planSummer vacations are the perfect time to find a dream home in the perfect location. Today’s investors sometimes need clever solutions for affordability, so it’s important to be aware of all of the available investment tools. One such tool is the self-directed IRA. Did you know that your IRA/401k funds can be used to buy real estate? Let’s look at some of the options available for purchasing a second home with IRA funds:<br /><br /><b>1. Vacation home is purchased and held in a self-directed IRA for investment purposes only.</b><br />
<br />This scenario is the simplest. Existing IRA or 401k funds are used to fund the investment account. The IRA directly owns the property and receives special tax treatment by the IRS. <br /><br />PROS: If you love this home and this area, chances are others will too. Vacation homes in desirable locations can be valuable investments. The property may be rented out to vacationers and earned income grows tax-deferred or tax free in the IRA. Many investors also enjoy holding hard assets like real estate in addition to or instead of paper assets as part of their portfolio.<br /><br />CONS: You cannot personally use any real estate owned by your IRA account. This second home would be purely for investment purposes. The IRA must pay all expenses associated with the vacation home. <br /><br />IMPORTANT CONSIDERATIONS:<br />Compare the return on investment for the vacation home, whether from rental or resale to the return on investments currently held by your retirement account. If cashflow and/or returns on the vacation home are higher, it is probably worth looking at the investment as a potential option for your IRA/401k plan. <br /><br /><b>2. Buy the property now and plan to live there after you retire.</b><br />
<br />Up to age 59 ½ this option would work identically to Option 1 above. At age 59 ½ you can elect to take a percentage (up to 100%) of ownership in the IRA-owned property in lieu of cash distributions from the IRA. Once you have distributed 100% ownership, you are permitted to use the property as a vacation or primary home.<br /><br />PROS: Purchasing the property now protects your ability to own the property at retirement. As real estate in popular resort areas continues to rapidly rise, you will have locked in your price at today’s cost.<br /><br />CONS: This strategy requires patience. You cannot personally use the property until you have distributed 100% ownership after age 59 ½.<br /><br />IMPORTANT CONSIDERATIONS:<br />Taking the property distributions can take time. Talk with your advisors and make sure that you are willing to wait the necessary time.<br /><br /><br /><b>3. Secure a mortgage using your IRA and make mortgage payments via IRA distributions using the 72t exemption, which eliminates the 10% early withdrawl penalty.</b><br />
<br />This scenario is the most complex and will require consulting with a team of professionals to execute properly. Essentially, the IRA invests in an annuity or other investment with guaranteed payments or stable cashflow. As money flows into the IRA account from the annuity or other investment, payments are received as a distribution (without penalty) by the IRA holder. These distributions are used to pay the mortgage on the second home, which is held directly by the individual, NOT by the IRA account. Contact our office for a follow-up consult or for a report on 72t exemptions or visit 72t.NewDirectionIRA.com<br /><br />PROS: You can begin using the property immediately as it is owned directly by you. This strategy provides investment capital for investors with IRA balances that are larger than personal cash savings.<br /><br />CONS: Investor must be 59 ½ or older in order to take advantage of a 72t exemption. Since the property is owned directly by you and not the IRA, you lose all of the tax advantages of IRA-owned properties. As a result, taxes apply to the sale of the property as well as the rental income. Income tax is paid on the distributions used to pay the property mortgage. <br /><br />IMPORTANT CONSIDERATIONS:<br />You must already have enough wealth to create the annuity providing guaranteed payouts substantial enough to pay the property mortgage.<br /><br />Buying property using an IRA/401k not only provides critical investment capital, it also has associated tax advantages.<br />Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-84584201844010997922013-10-22T10:25:00.002-07:002013-10-22T10:25:52.038-07:00Land in an IRA<br />More and more investors have been turning to real estate as a way to diversify their retirement portfolios. Everything from pre-construction condominiums and rental properties to rehabs and lease options are being held inside of IRAs and 401(k) plans. With larger contribution limits and more than $3 trillion currently in retirement plans, investors are now able to look outside the realm of stocks and mutual funds into assets such as real property. Though investors continue to become more sophisticated in their real estate transactions, undeveloped land remains a clear-cut favorite among IRAs and other retirement plans. The simplicity of raw land provides investors with the opportunity to diversify into real estate, without the headaches of upkeep. <br /><br />The obvious upside to adding real property to a retirement plan is diversification. Real estate has long provided investors a way to offset fluctuations in the securities market. Over the years, millions of investors have utilized this diversification strategy in their personal portfolios, yet only recently have they started implementing this method within their retirement plans. One of the reasons why less than 3% of all retirement funds are being invested in real property is the “idea” that managing the asset is difficult. An attractive attribute to land, is its simplicity. Land truly provides investors with opportunity to take part in the real estate market, without the headaches of upkeep and unforeseen expenses. <br /><br />Keep in mind that when a retirement plan holds a piece of real property, all the expenses involved must be paid for by the plan. Simply put, if an IRA owns a rental property, then the IRA must pay for all of the repair and upkeep of that unit. Investors who self direct their retirement plans into assets like real estate will have to be more involved than those who just turn their accounts over to a Brokerage house. <br /><br />However, raw land offers a low maintenance way to invest in real estate. Land has only one relatively predictable expense in annual property taxes. Of course you could lease out your land to a farmer or a timber company and there may be additional expenses. But for most parcels of land, property taxes are the only expense. An investor can diversify part of their retirement portfolio into a parcel of a land and not have to worry about any unexpected repairs or cost. <br /><br />Any economist or financial advisor will tell you appreciation is driven by supply and demand. There is a simple truth when it comes to land—there is only so much. The supply is somewhat fixed, especially when it comes to desired land around mountains, waterways and growing metropolitans. <br /><br />The goal of a retirement plan is to build up your own nest egg through wise investments. Diversification is the key to any successful portfolio. Understanding all of your investment choices will only make you a smarter investor. When it comes to diversifying into real estate, raw land is about as close to a mutual fund as you will find. It’s an asset that can be purchased and held for the long term, without the worry of unexpected repairs or expenses. Whether it’s a lot in a planned development near Destin, Florida or a large track of farm land outside of Topeka, Kansas; land provides a simple way to diversify a stock heavy portfolio. <br /><br /><br /><br />Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-49180316657532641032013-09-11T10:31:00.000-07:002013-09-11T10:31:00.375-07:00Living in your IRA-owned real estate<div class="MsoNormal">
<b><i>“I have an IRA invested in Real Estate. Now how do I take that real
estate to live in, when I’m retired?”<o:p></o:p></i></b></div>
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<b><i><br /></i></b></div>
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Hopefully, that rental property has served your retirement
plan well, not only appreciating in value over time, but also providing regular
monthly cash flows over a number of years.<o:p></o:p></div>
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But what if you’ve decided you really want to retire and
live in that house? <o:p></o:p></div>
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If the house was purchased by your Roth IRA, and you’ve held
the Roth IRA for 5 years and turned 59 ½, it’s yours to distribute to yourself,
with no tax or penalties.<o:p></o:p></div>
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But what are your options if your real estate assets were
held in a Traditional account?<o:p></o:p></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiemytDSn4a5vNg7a_mJ8B4SC1JXg-9e4zWf4R0qmV7xrleB_CZ1wOtbRZrL4ce8kbXpT7YEx-y5G7d8IyPKcpQ5uHkm1asSuNo93tUb53XzNEDUS1WFIyKVJGmsVp4kfUFFdooJjbAwf57/s161/realestatebestpractices.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="real estate ira, living in ira real estate, real estate news" border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiemytDSn4a5vNg7a_mJ8B4SC1JXg-9e4zWf4R0qmV7xrleB_CZ1wOtbRZrL4ce8kbXpT7YEx-y5G7d8IyPKcpQ5uHkm1asSuNo93tUb53XzNEDUS1WFIyKVJGmsVp4kfUFFdooJjbAwf57/s161/realestatebestpractices.jpg" title="Real Estate IRA" /></a>Certainly, you can distribute the house once you’re 59 ½,
without paying any premature withdrawal penalties. But you’ll have to pay taxes
on the dollar amount (in this case, property value) of your withdrawal, as
though that amount was some cash added to your income in the year you take it.
Naturally, since we’re talking about thousands of dollars, this may be costly.
However, you have a few options:</div>
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<b>1) You can distribute
your IRA’s holdings a little bit at a time.<o:p></o:p></b></div>
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For example, at age 59 ½, you could begin distributing 10%
of the property from your IRA each year. If you distributed 10% in year one of
such a program, this would result in the property being owned 90% by your IRA
and now 10% share is owned by you. You’ll need to arrange with the title
company so that the ownership share is properly reflected accordingly each
year. You’ll still be constrained from using the property personally until it
is entirely distributed from the IRA. This will allow you to spread the tax
burden from distributions over a 10-year period.<o:p></o:p></div>
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Keep in mind, this will change your monthly cash flows. You
will personally be entitled to a direct 10% of income and responsible for 10%
of expenses. These proportions would need to be honored since there are now two
investors: you and your IRA.<o:p></o:p></div>
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<b>2) You could consider
converting a portion of your IRA (including that real estate asset) to a Roth
IRA.<o:p></o:p></b></div>
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Yes, you’ll pay income tax on the amount you convert, but
this may make sense for you, if you anticipate a number of years more of income
to sock away, and for your IRA’s value to grow, before reaching age 59 ½. The
point here is you may be paying some tax now on a smaller amount, instead of
paying tax on a potentially larger amount down the road at retirement.<o:p></o:p></div>
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You could also convert a fractional share from your IRA to a
Roth IRA each year so that at some point in the future your Roth IRA owns the
entire property. Then, if you’ve reached age 59 ½ with 5 years in that Roth IRA,
it’s available to withdraw free from penalty or tax.<o:p></o:p></div>
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<b>3) You may elect to
begin distributing shares of your property before retirement age by using the
72T method. <o:p></o:p></b></div>
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The IRS grants the 72T method (substantially equal payments)
as an exception, which enables one to avoid the penalty for early IRA
withdrawals.<o:p></o:p></div>
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The 72T exception offers a choice of methods, which you can
use to tailor the timeline of your distributions. All are based on your life
expectancy (or, if you elect, on the joint life expectancy of you and your
beneficiary), and whichever method you choose must be continued for at least 5
years or until reaching age 59 1/2.<o:p></o:p></div>
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Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-55660978548426701382013-09-06T04:30:00.000-07:002013-09-06T04:30:02.320-07:00How to help a cousin buy a home with your Real Estate IRA<div class="MsoNormal">
One of our New Direction IRA client representatives recently
spoke with a prospective client who asked us to frame some ways for his IRA to
help a cousin buy a home. The cousin has a good job, but he wasn’t sure about
his credit rating nor did he have the money for a down payment. We spent some
time talking about the ways that IRAs can participate in real estate and the
IRS rules associated with that participation. Below is an excerpt that was sent
to the cousin to get the ball rolling. If you are in a similar situation,
perhaps this may help you get your thoughts together.</div>
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<o:p></o:p>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjh-wsCDQdZw2O6hUjKDGalQlhZOPv_SspmfkrblONQP8fbfyUOmIt9o0yQwBqiOPn-cutDKfa3tKk3JNrvESCRJNOmPQYagFUeQnkA351oGUBh9dbLu6Vk3ag-6LTFWQCx7YqHPdrIYxpW/s140/real_estate_investing-140x140.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="partner with real estate ira, ira, real estate ira, what is ira" border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjh-wsCDQdZw2O6hUjKDGalQlhZOPv_SspmfkrblONQP8fbfyUOmIt9o0yQwBqiOPn-cutDKfa3tKk3JNrvESCRJNOmPQYagFUeQnkA351oGUBh9dbLu6Vk3ag-6LTFWQCx7YqHPdrIYxpW/s140/real_estate_investing-140x140.jpg" title="Real Estate IRA" /></a><b><i>Scenario 1</i></b><i> – My IRA buys the house (the
property would literally be deeded to the IRA). It secures a non-recourse loan
to do this. Typically, a lender will want 30-40% down. So our max purchase
price would be about $150K I am guessing. You would pay rent to the IRA or we
can set up a rent-to-own agreement. This set-up, depending on the purchase
price might leave me with little cash; so, you may need to pay for any
unexpected repairs, which of course, would come off the rent or be recognized
in some way. The advantages to this method is that you would not have any
initial cost and would not have to qualify for financing. And, you could buy my
IRA out whenever it was feasible for you.</i><o:p></o:p></div>
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<b><i><br /></i></b></div>
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<b><i>Scenario 2</i></b><i> – We buy the house as
tenants-in-common. My IRA and you are the deed holders, each owning a
percentage of the house. This can be kind of fluid but the basic idea might be
that I put in the ~$50K, and you come up with the rest. If you need financing
for your part, the collateral for the loan would have to be something other
than the house. It would also be helpful for you to let me know what your exit
strategy might be. In this set-up, I really just contribute the IRA money in
exchange for a percentage ownership in the house, but from that point, pretty
much all the financial burden would fall on you.</i><o:p></o:p></div>
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<b><i><br /></i></b></div>
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<b><i>Scenario 3</i></b><i> – I can simply loan you the
money that I have available and we can set up the rate, term, and such in a way
that is financially possible for you. Like interest only for several years,
with a balloon payment down the road or some such. This set-up would mean that
you are the deed holder, and the financing would be whatever you can work out.</i><o:p></o:p></div>
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<i>Because you are a non-disqualified person to my IRA, we
have a good deal of flexibility in how we set this up. In part, it will come
down to how you want to play it and what your financial options are. One thing
that I will mention is that my IRA’s participation always needs to be titled as
the IRA. The important thing is to not put just my name on an offer or any type
of legal document.</i><o:p></o:p></div>
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As a point of clarification, disqualified persons to an IRA
include the IRA holder, their spouse, and lineal ascendants and descendants
(and their spouses). However, the sides of the family tree, siblings, aunts and
uncles, cousins, etc. are not disqualified persons.<o:p></o:p></div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-52479168706986375242013-09-04T04:30:00.000-07:002013-09-04T04:30:01.690-07:00Can I be the property manager for my IRA-owned real estate?<div class="MsoNormal">
Many self-directed investors who call our office ask, “Can I
act as the property manager for my IRA owned real estate?” The answer is yes,
but there are several rules that must be followed in order to comply with IRS
guidelines.<o:p></o:p></div>
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<b><span style="font-size: 12.0pt; line-height: 115%;">1. Do not
handle the finances of your IRA owned real estate personally.</span></b><span style="font-size: 12.0pt; line-height: 115%;"><o:p></o:p></span></div>
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<b><span style="font-size: 12.0pt; line-height: 115%;"><br /></span></b></div>
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<b>Example:</b> Pay bills or expenses out of pocket, have
rent checks made out to you personally, etc.<o:p></o:p></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5_xynMUQ7j_fIbUaE4BcpJa_8VgP_YWILN2Seiwr_zmGN1r8RQkVyuMPuDZu5fQLCuT8RD6hFXlLTjt6juIQFw8vU5xgHH_YQxHl-wCIgy31Zl7YuGymfK7NfIsvrObZ55LrtI6WPKidy/s461/personal-vs-realestateira.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="real estate ira, property manager, real estate property manager ira" border="0" height="236" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5_xynMUQ7j_fIbUaE4BcpJa_8VgP_YWILN2Seiwr_zmGN1r8RQkVyuMPuDZu5fQLCuT8RD6hFXlLTjt6juIQFw8vU5xgHH_YQxHl-wCIgy31Zl7YuGymfK7NfIsvrObZ55LrtI6WPKidy/s320/personal-vs-realestateira.jpg" title="Property Manager Real Estate IRA" width="320" /></a><b>Facts: </b>When investing in real estate with your IRA,
you are not the investor. The IRA (a legal entity) is the real investor and
title to the real estate is most likely held in the name of the IRA (Example: <i>NDIRA,
Inc. FBO Client Name IRA</i>). This is a tough concept for some investors to
grasp because it can be difficult to conceptualize who is really investing.<o:p></o:p></div>
<br />
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<br /></div>
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<b><span style="font-size: 12.0pt; line-height: 115%;">2. You
are allowed to be the <u>decision-maker</u>.</span></b><span style="font-size: 12.0pt; line-height: 115%;"><o:p></o:p></span></div>
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<b><span style="font-size: 12.0pt; line-height: 115%;"><br /></span></b></div>
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<b>Example: </b>Selecting contractors, choosing fixtures,
screening tenants, etc.<o:p></o:p></div>
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<b>Facts: </b>You are ultimately the decision-maker for all
investment related decisions. However, IRS code prohibits you from personally
adding sweat equity to the property. This means that <i>you </i>are not
permitted to perform repairs or upgrades; they must be done by a
non-disqualified person and paid for by the IRA. To the IRS, value-added
services that are personally rendered constitute a contribution that cannot be
taxed and are therefore disallowed. The bottom line is that your IRA must have
access to an adequate cash buffer necessary to pay all expenses related to the
property.<o:p></o:p></div>
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<br /></div>
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<b><span style="font-size: 12.0pt; line-height: 115%;">3. A <u>disqualified
person</u> or <u>entity</u> cannot be hired by the IRA to manage the property.</span></b><span style="font-size: 12.0pt; line-height: 115%;"><o:p></o:p></span></div>
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<b><span style="font-size: 12.0pt; line-height: 115%;"><br /></span></b></div>
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<b>Example: </b>IRA Holder says, “Well, since I can’t
personally manage the property for a fee, can the IRA pay a property management
company that I own and manage myself?”<o:p></o:p></div>
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<b>Facts: </b>The short explanation here is that your IRA
cannot employ an entity that is managed or controlled by you or your direct
lineal ascendants or descendants. The IRS logic here is to keep all IRA
transactions completely arms-length and not co-mingled with any personal
benefit. To truly understand this rule, you need to continue reading more about
<u>“Disqualified Persons” under Section 4975 of the Internal Revenue Code</u>.<o:p></o:p></div>
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<br /></div>
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<b><span style="font-size: 12.0pt; line-height: 115%;">4. You
cannot take a personal commission as a real estate professional for brokering
your IRA’s real estate transaction.</span></b><span style="font-size: 12.0pt; line-height: 115%;"><o:p></o:p></span></div>
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<b><span style="font-size: 12.0pt; line-height: 115%;"><br /></span></b></div>
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<b>Example: </b>As a real estate agent by profession, you’d
like to help yourself by brokering the transaction and taking the commission
for the deal.<o:p></o:p></div>
<br />
<div class="MsoNormal">
<b>Facts:</b> As mentioned above, IRA transactions need to
be made as arms-length investments, separate from any personal benefit. You are
not permitted to immediately benefit from your IRA investments; rather, you are
investing for the future. You can negotiate a change in the purchase price of
the property that may reflect your services, but you may not take a commission
personally.<o:p></o:p></div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-13454343546277582992013-08-28T13:02:00.000-07:002013-08-28T13:02:55.716-07:00How to partner with your IRA to buy Real Estate<i>Q - It is possible, supposedly, to
"partner with your IRA". You put in, say, half the money and the IRA
puts in the other half. The partnership does a fix and flip. The net profits
would then be split 50/50.<o:p></o:p></i><br />
<i>Is this true? I thought you could only
do this if you start the business with the IRA as a partner. But if your
business already exists, you cannot use funds from your IRA for a flip. Is that
not right?<o:p></o:p></i><br />
<br />
U.S. Department of Labor ruling 2000-10 allows you to partner with your IRA but there are special circumstances under which it is allowed. Otherwise it's
self-dealing and a prohibited transaction. Here are the basics for partnering with your IRA.<br />
<br />
<o:p></o:p>
<br />
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg52BWRSgrs5hmLqFuzkCzHNblzsiFfTuGLToPMp3Eo2sPC6s5PLQ0H6wUevO1QYIzweXgpW3e7jfzZCEmlqE-A1W1Nh5MT-w4lk6ctvvyerWLkuNnCLvBT1Gqamvwc0EoJ7f8iTC8Dz9ry/s150/woman-with-keys-150x150.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="partner with ira, partner ira real estate, real estate ira" border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg52BWRSgrs5hmLqFuzkCzHNblzsiFfTuGLToPMp3Eo2sPC6s5PLQ0H6wUevO1QYIzweXgpW3e7jfzZCEmlqE-A1W1Nh5MT-w4lk6ctvvyerWLkuNnCLvBT1Gqamvwc0EoJ7f8iTC8Dz9ry/s150/woman-with-keys-150x150.jpg" title="Real Estate IRA" /></a><span style="font-family: MyriadPro-Regular; font-size: 12pt;">Your IRA can partner with another person, entity or IRA. In
partnering, as you may know, the IRA would own only 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 some restrictions
apply.</span></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: MyriadPro-Regular; font-size: 12.0pt; mso-bidi-font-family: MyriadPro-Regular;">One
major restriction is when your IRA partners with disqualified persons, the
ownership percentage must be kept constant throughout the life of the
investment, and all expenses and income must be split according to that ratio.
Each bill must be paid according to the ownership ratio. <o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: MyriadPro-Regular; font-size: 12.0pt; mso-bidi-font-family: MyriadPro-Regular;">For
instance, if you and your IRA each pay half of the cost for a real estate
investment, any renovation or fix-up costs must also be split in half.
Conversely, any income from the property must also be split in half. <o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: MyriadPro-Regular; font-size: 12.0pt; mso-bidi-font-family: MyriadPro-Regular;">Although
these restrictions require an active investor to properly manage the
investment, a good self-directed IRA provider can smooth the edges and make
your investment and management process easier. Partnering with your IRA has
worked for some of our clients and can be a valuable tool to increase
retirement funds and acquire lucrative real estate assets. <o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: MyriadPro-Regular; font-size: 12.0pt; mso-bidi-font-family: MyriadPro-Regular;">And,
contrary to popular belief, you don’t need to start an LLC when partnering with
your IRA to purchase real estate. You can also partner with non-disqualified
persons to your IRA such as your siblings or cousins to set up a more flexible
investment plan.<o:p></o:p></span></div>
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<br /></div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-69565090641845056202013-08-28T04:30:00.000-07:002013-08-28T04:30:00.584-07:00Best practices for Real Estate IRA investing<div class="MsoNormal">
<b>How to manage your
Real Estate IRA Investments<o:p></o:p></b></div>
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<b><br /></b></div>
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For those with a penchant for real estate investing, IRAs
are a potent vehicle indeed. Outside of a tax-advantaged account, such as an
IRA or a SEP IRA, rental income is taxable every year, as you receive it, and
passive activity rules restrict your ability to claim losses from real estate.
If you use a self-directed IRA, or a real estate IRA, however, you can
accumulate all that rental income tax-deferred, or tax-free if you hold the
asset in a Roth IRA. If you have the patience, liquidity and know-how to be a
successful real estate investor, it can make perfect sense to leverage these
skills in a self-directed IRA or other retirement account as well.<o:p></o:p><br />
<br /></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjM_eCO-MtvyPoHZbpwySyXiWPmUVj9bnRQYZQJH726DDnaBU1hi0VPpI7Beyn-u6V05Hgkbj1IDeCI-z60LFQiViu_euH5z__8vvxG3Zd5n9MFkbFL14shdGgkWkQqE0REj0Hso1sOs0Vn/s140/property-management-140x140.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="real estate ira, real estate investments, self direct" border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjM_eCO-MtvyPoHZbpwySyXiWPmUVj9bnRQYZQJH726DDnaBU1hi0VPpI7Beyn-u6V05Hgkbj1IDeCI-z60LFQiViu_euH5z__8vvxG3Zd5n9MFkbFL14shdGgkWkQqE0REj0Hso1sOs0Vn/s140/property-management-140x140.jpg" title="Real Estate IRA investing" /></a></div>
<div class="MsoNormal">
That said, there are some things that you need to be aware
of that are unique to using an IRA or other retirement account for real estate
investing, because if you don’t comply with certain rules and regulations, you
risk exposing yourself to unintended penalties and taxes.</div>
<br />
<o:p></o:p>
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<b>Watch Your Cash Flows<o:p></o:p></b></div>
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<b><br /></b></div>
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Paying attention to cash flow is critical with real estate
IRA investing. Remember, the law limits the amount of new money you can
contribute to an IRA each year to $5,000 (or $6,000 if you are over age 50.) As
any veteran property owner knows, property repairs and renovations can easily
exceed many times this amount.<o:p></o:p></div>
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This means you can’t intervene in your IRA-owned property
with a massive cash infusion from outside your retirement accounts, no matter
how badly your property needs the repairs. For anything over the max $5,000
annual contribution, you will need to pay for it from liquidity you have in the
IRA itself, roll the money over from another eligible retirement account, or
have your IRA borrow the money.<o:p></o:p></div>
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<br /></div>
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For this reason, it’s generally best to have some liquid
reserves – cash, cash equivalents, reasonably stable securities, or a line of
credit your IRA can tap for this purpose. Your checking account won’t do you
much good when you have to pay for a $30,000 roof.<o:p></o:p></div>
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<br /></div>
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<b>Set Aside Cash in
Your IRA<o:p></o:p></b></div>
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<b><br /></b></div>
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Outside of an IRA, the tax code provides a natural means for
investment property owners to set aside some reserves. This is part of the
logic of depreciation deductions – you’re supposed to set aside the savings to
pay for expected repairs, maintenance, upkeep and eventual replacement. But you
don’t get a depreciation deduction in an IRA. You need to set aside reserves
from operating income within your IRA or be prepared to transfer assets from
elsewhere.<o:p></o:p></div>
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<br /></div>
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<b>Understand Prohibited
Transactions<o:p></o:p></b></div>
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<b><br /></b></div>
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Remember, you can’t lend money to your IRA personally. If
your IRA needs to raise cash in a hurry, you can’t be the person to provide it,
beyond allowable contributions and rollovers. The same applies to your
descendants, your parents and grandparents, and any of their spouses. Ditto for
any business entities they control. (The law does not specifically rule out
your brothers and sisters, though).<o:p></o:p></div>
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<br /></div>
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The same people who can’t lend to your IRA also can’t borrow
from it, for the same reason (though you can use your self-directed IRA to lend
money at interest to whomever else you like.)<o:p></o:p></div>
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<br /></div>
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Likewise, you can’t do business directly with your IRA, nor
can any other disqualified individuals, nor can their spouses or any business
entities they control. Some people try to open a property management company,
or construction company, and have their IRAs compensate their companies
directly for services rendered. This is prohibited by the IRS.<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal">
<b>Understand Long-Term
Tax Ramifications<o:p></o:p></b></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
If you hold a real estate investment outside a retirement
account, and sell it at a profit, you pay tax at capital gain rates. If you
held it for more than a year, your capital gain tax will be less than your
income tax. However, if you hold the property in a tax-deferred retirement
account, you will need to eventually pay income taxes on any gains, rather than
the lower long-term capital gains rate. To avoid this, consider using a Roth
IRA to hold real estate or capital assets in an IRA. You don’t get a current
year tax deduction, and you can’t take depreciation deductions in either case.
But any gains are tax free. Additionally, you sidestep the eventual problem of
taking required minimum distributions when you get older, which can be a
challenge if your retirement portfolio is in illiquid holdings such as real
estate.<o:p></o:p></div>
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<br /></div>
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<b>Don’t Stay in the
Property<o:p></o:p></b></div>
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<b><br /></b></div>
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Ordinarily, rental properties allow you to spend a couple of
weeks per year in them without jeopardizing their status as investment
properties. This is not true for IRA-owned real estate. You can’t live in the
property, even if you’re paying rent. You can’t even stay overnight in the
property. What’s more, you can’t let your children, grandchildren, parents,
grandparents, or their spouses stay overnight either. If you do, the IRS could
consider it a distribution, and impose a tax equal to 100 percent of the amount
involved.<o:p></o:p></div>
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<br /></div>
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<b>Be Careful With
Borrowing<o:p></o:p></b></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
Many people are confused by IRS prohibitions on lending to
or borrowing from your IRA personally, or pledging your IRA as collateral for a
loan, and think that you cannot borrow money for your IRA at all. In fact, your
IRA<i> can</i> borrow money. But understand that it’s your IRA that’s borrowing
the money – not you. This distinction is crucial. Your IRA can only borrow
money from non-disqualified individuals and entities on a non-recourse basis.
This means that if the loan should default, the lender can only come after the
IRA to collect. Only assets held within the IRA can serve as collateral for the
loan. You cannot pledge anything outside the IRA as collateral, nor sign a
personal guarantee of any kind.<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal">
<b>Beware of Taxes<o:p></o:p></b></div>
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<b><br /></b></div>
<br />
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Taxes? In an IRA? Alas, yes. While your IRA can defer income
tax and is generally exempt from capital gains tax, you still have to pay
property taxes if you own real estate in your IRA. Additionally, if your IRA
employs leverage – as is common for real estate investing – your IRA may be
subject to unrelated debt income tax, or unrelated business income tax,
depending on the situation. New Directions IRA does not give tax advice, so you
should retain the services of a qualified tax advisor, such as a CPA, tax
attorney or enrolled agent, for advice specific to your situation.<o:p></o:p></div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.comtag:blogger.com,1999:blog-7788411966623249829.post-82841162244172864132013-08-23T04:30:00.000-07:002013-08-23T04:30:01.152-07:005 little known facts about Real Estate IRA investing<div class="MsoNormal">
1. <b>An IRA can secure a loan in order purchase an asset.</b>
If you have a property in mind but don’t have the funds in your account to
purchase it outright, the IRA may be able to secure a non-recourse loan. Keep
in mind that not all lenders make this type of loan, and, because the lender
cannot rely on personal assets as collateral, it is common for them to require
a down payment of 30% to 40%. Also, an asset secured using a loan may be
subject to Unrelated Business Income Tax (UBIT). This may sound like a
negative, but needing to pay UBIT means that the investment is making money.</div>
<o:p></o:p><br />
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<br /></div>
<div class="MsoNormal">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiemytDSn4a5vNg7a_mJ8B4SC1JXg-9e4zWf4R0qmV7xrleB_CZ1wOtbRZrL4ce8kbXpT7YEx-y5G7d8IyPKcpQ5uHkm1asSuNo93tUb53XzNEDUS1WFIyKVJGmsVp4kfUFFdooJjbAwf57/s161/realestatebestpractices.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="real estate ira, self directed ira, real estate" border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiemytDSn4a5vNg7a_mJ8B4SC1JXg-9e4zWf4R0qmV7xrleB_CZ1wOtbRZrL4ce8kbXpT7YEx-y5G7d8IyPKcpQ5uHkm1asSuNo93tUb53XzNEDUS1WFIyKVJGmsVp4kfUFFdooJjbAwf57/s161/realestatebestpractices.jpg" title="Real Estate IRA" /></a>2. <b>Real Estate has always been an allowable asset in an
IRA.</b> This fact, however, is not widely known. In fact, the IRS received so
many inquiries, IRS.gov issued this statement, “…IRA law does not prohibit
investing in real estate, but trustees are not required to offer real estate as
an option.” Because IRA providers are not required to offer real estate, it is
up to the IRA holder to establish an account with a provider that will perform
the administration and bookkeeping necessary for that asset.<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal">
3. <b>While an IRA holder can provide brain power for
his/her Self-Directed IRA, he/she is not allowed to perform physical services
for the real estate assets the IRA owns.</b> It is relatively well known that
an IRA holder can’t live in real estate that his/her IRA owns, it is less well
known that sweat equity is not allowed. Many people would like to be able to
have their IRA purchase a rental property and then act as the property manager,
including making repairs and performing maintenance. Unfortunately, the IRA
holder can only contribute some brain power/strategy to the operation of an
IRA-held property. When the IRA holder goes over to the property to paint a
room, do some light plumbing, or some other physical service, he/she is
stepping into a prohibited activity.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
4. <b>An IRA can partner with other investors, with other
IRAs, or even with the IRA holder’s personal funds to purchase an asset.</b> In
this scenario, the IRA purchases a percentage of the asset and the partners
purchase the balance. It is important to note that all income and expenses need
to be divided along the percentage of ownership lines. For example, if in a
partnership, the IRA buys 50% of an apartment building, then 50% of all of the
income and expenses come to and are disbursed from the IRA. So, if your IRA does
not have enough money to purchase 100% of a real estate asset, and you don’t
want your IRA to secure a loan, it may be a good idea to think about using a
partnership to acquire the asset you want.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
5. <b>A real estate asset held in a traditional IRA does not
have to be sold in order to be distributed to the IRA holder.</b> While it is
certainly allowable for an IRA to sell a property and then distribute the
proceeds, there is another alternative. The physical asset itself can be
distributed, with the obligatory tax on its value. In addition to a complete
distribution of the asset, a percentage of a property can be distributed in a
given year. The way that works is that the real estate is re-titled to reflect
a new percentage of ownership between the IRA and the IRA holder. The IRA
holder would then pay the taxes on the value of the percentage distributed in
that year. In this manner, the tax burden could be spread out over a period of
years while still holding on to the physical property.<o:p></o:p></div>
Anonymoushttp://www.blogger.com/profile/17483992955139053005noreply@blogger.com