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June 19, 2012
Did you know that you can invest in real estate, mortgages, leases, and other asset backed investments inside your retirement plan?
Indeed, since 1975 self-directed plans have been available, although relatively few IRA holders have taken the time to understand their options and take advantage of such retirement plans.
The IRS rules regarding prohibited transactions are not too complex, yet one should consult a tax advisor for specific advice. Disqualified people include your immediate family (except siblings) employers (in a qualified plan), certain partners, fiduciaries and other categories spelled out in IRS code. IRA owners may not borrow money from their IRA, sell property to it, receive unreasonable compensation for managing it, or use it as security for a loan. There are also several named categories, such a collectables which also may not be held by your IRA.
The opportunities outside these prohibited transactions are significant. You may buy, sell or exchange investment property inside your self-directed retirement account. You can partner with friends, relatives and business associates to purchase property, and then lease it to anyone that is not a disqualified person. You can roll property from one retirement plan to another – or even take property from your plan as a distribution.
We have seen clients form investment groups, combining IRA and non-IRA funds to purchase and hold property, rehab and turn properties or simply lend out the funds in the form of notes and mortgages.
In addition to these ideas, an IRA may also invest in partnerships, LLCs, private stock offerings, loans (both secured and unsecured), tax lien certificates, purchase options, joint ventures and other investments.
So if you are confident in your abilities to make your own investment decisions, have the desire to reduce or eliminate the tax consequences on your gains, and have the resources to invest – self-direction may prove to be a wise choice for your retirement plan.
Glen Mather is President of NuView IRA, Inc., a leading self-directed IRA administrator in Orlando. He can be contacted at 407-367-3472 or email@example.com