How to Place Real Estate in an IRA


real estateTell me if this sounds familiar. Every time you think about saving for retirement, two things happen:

1. The thought of putting money in the stock market makes you recall your experience on the Dragon Coaster after having eaten too many corndogs.

2.   You experience your recurring daydream of becoming king of the local real estate market.

But then reality kicks in, and you reluctantly start fishing around for the postcard you got from the latest mega mutual fund.

You can go that route if you want to. You will be joining a lot of other people who watch their retirement funds dip and swing with the vagaries of Wall Street. However, there is an alternative. Broad Financial is a company that specializes in self-directed IRAs. They have streamlined the process so that putting a piece of local real estate in your IRA is as easy as signing a check.

The way the self-directed platform works is through the power of a LLC (Limited Liability Company.) When you decide you want to take control, Broad sets up a dedicated LLC for your IRA and appoints you as its manager.   Then, you can open a checking account at the bank of your choosing in the name of the LLC. And that’s pretty much it. Now you can place real estate in your IRA by just writing a check from the LLC’s checking account. The sale takes place immediately, there are no additional transaction or asset fees, and your retirement is growing with a real piece of property.

That’s the basic idea. Now let’s address a few common questions.

What kind of taxes do I have to pay if I hold real estate in my IRA?

The answer is none. The property is considered an asset of your retirement fund, and thus is tax deferred until you reach retirement age. If you have a self-directed Roth IRA, then you’re tax free forever.

What kind of property is my IRA allowed to buy?

There are no limitations. If you find a piece of real estate that you think can make money, be it as a rental, fix-and-flip, or a straight up investment, you can purchase it for your IRA.

Can I just make a down payment with my IRA funds and use a mortgage to pay for the rest?

Yes, but you have to use a non-recourse loan. That means that the lending institution has no recourse to the individual borrower, and instead guarantees the loan with the property itself. The reason why you have to use a non-recourse loan is so that you don’t give any personal guarantees for your IRA. Giving a personal guarantee would constitute a Prohibited Transaction. If you’re interested in obtaining a non-recourse loan for your IRA, Broad can provide you with a list of reliable institutions.

How long does it take to set up a self-directed IRA?

It depends on the state where you will be creating your LLC. Different states have different set-up times. Normally, the process can be accomplished within two weeks.

What happens if I want to sell the property?

Just go ahead and sell it. The proceeds from the sale are deposited back into the LLC’s checking account, thereby becoming part of the IRA’s assets.

With a self-directed IRA, you can move beyond Wall Street and invest in assets that you know and understand. Real estate is just one of the options. Other popular choices include franchises, private loans, and business start-ups. Basically, any solid investing idea can be financed with a self-directed IRA. If you have hesitated in saving for retirement because of the wild market swings, now is the time to reconsider. Get going with a self-directed IRA and you can finally start creating your own prosperity.

Broad Financial specializes in self-directed IRAs. You can reach them at 800.395.5200, and find out if the self-directed platform makes sense for you.

Written by Jon the Saver

This post was written by yours truly, Jon Elder. My mission is to help you succeed in your personal finance life. Join me on the journey to financial freedom! You can subscribe through RSS FEED or EMAIL updates. You can also find me on TWITTER
and FACEBOOK
. Happy investing 🙂

Jon the Saver

This post was written by yours truly, Jon Elder. My mission is to help you succeed in your personal finance life. Join me on the journey to financial freedom! You can subscribe through RSS FEED or EMAIL updates. You can also find me on TWITTER and FACEBOOK . Happy investing 🙂

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