Real Estate IRA The IRA is a retirement vehicle with plenty of potential, but almost no one takes advantage of it. The real estate IRA is one strategy for getting the most out of your retirement dollars. Have you ever heard of a real estate IRA? Probably not. Instead, you have probably been told and read that the money in your IRA should be invested in mutual funds or stocks. Well, you can do that if you want to follow the herd and make small gains. If you prefer much greater gains, effective tax reduction and thinking outside of the box, the real estate IRA is the answer. First things, first. The real estate IRA is not an aggressive strategy. It is not something that is going to raise eyes at the IRA. Investing in real estate through your IRA is retirement planning 101. In fact, you can invest in real estate using your IRA, Roth IRA, 401(k), SEP-IRA and so on. Don’t believe me? Section 408 of the Internal Revenue Code allows for the purchase of land, real property, commercial property, condominiums and so on. So, how does the Real Estate IRA work? Well, the name is misleading. We are actually talking about a self-directed IRA that invests in real estate. A self-directed IRA is one that you control, instead of seeding it to a bank or investment firm that limits your investments to stocks, mutual funds or bonds. Setting up an account is simple and the cost is nominal. Once you roll funds into the IRA, you are ready to invest. You can’t buy just any old real estate. The IRS puts at least some limitations on the real estate IRA strategy. The property must be purchased from an unaffiliated third party, to wit, you can’t buy your own home with the IRA nor can you buy your wife’s share! Also, “you” will not purchase the property, the IRA will do so through the custodian maintaining it. As the property grows in value over time, you are going to be able to capture the gain within the IRA and significantly leverage your IRA investment. Even better, you can use a real estate Roth IRA to take the proceeds from the eventual sale of the property TAX FREE! Remember, all distributions from a Roth IRA are tax free. The fact that the money comes from the sale of a real estate investment in the Roth is irrelevant. Obviously, the above represents a simple summary of the wealth building power of the real estate IRA strategy. Contact us for a consultation on this and other strategies to build wealth and prepare for retirement. << Back to IRA Strategies
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