Guest writer: Parker Caldwell – ROI Commercial Property Brokerage
Real estate can provide a viable option for IRA users looking to expand and diversify their income-yielding investment strategy. Real estate markets can represent a stable, profitable alternative long-term investment option compared with the uncertainty and volatility of stock market investing. There are several options available to self-directed IRA users that will allow them to do this.
However, it is important to remember that there are many moving variables – from choosing an investment strategy to the due diligence process that may make or break a real estate investment and IRA users must be aware of them along with knowing the permitted processes of using an IRA to finance a real estate investment property.
The Invest Florida Show educates investors of all backgrounds on how to make actionable real estate investment decisions. The hosts, Eric Odum and Steven Silverman, are two licensed real estate brokers who share an extensive knowledge of real estate investment strategy, including the use of IRAs to finance investments. While there are specific regulations in place that limit how IRA users can buy and hold real estate, it is not as complicated as one might think. It also provides IRA users the chance to take a more involved approach to investing.
The most important to thing to consider is what type of IRA you have: Roth IRA, Traditional IRA or a 401(k). Each is eligible for holding real estate, but IRA users need to be aware stipulations pertaining to each one.
The main attraction to using an IRA to invest in real estate is the ability to hold investment real estate that is either tax-deferred or completely tax-free upon distribution. It is a great, long-term investment strategy for those looking to maybe secure a vacation home or second home for retirement days.
Self-directed IRA users need to be aware of several things before deciding to invest in real estate though:
- IRAs cannot be used to purchase property owned by the IRA user or “disqualified persons”, immediate family members.
- If a property is purchased through an IRA, self-directed users and disqualified persons cannot use the property until it has been distributed out.
- Everything involving an investment property must be titled in the name of the IRA, not the user
- Financing is available through IRAs, but users must be aware that only non-recourse loans are acceptable and a UBIT (Unrelated Business Income Tax) is applicable.
- Property expenses must be paid through the IRA. If real estate is being held in the IRA as a rental property, income must be distributed into the IRA.
While these only represent general tips to be aware of when using an IRA to invest in real estate, self-directed IRA users should check with their IRA custodian or a certified and knowledgeable professional for further information before deciding to invest.
Self-directed IRA users wanting a more hands-on approach to their financial future should check out recent and past episodes of the Invest Florida Show. The show strives to provide the tools and resources necessary for self-empowerment. Serving as a living encyclopedia for investors, the weekly show features tips and news for investing in real estate with actionable investment advice from expert guests and the knowledgeable hosts. Listeners can tune-in to episodes at home or on the go with mobile apps (Itunes, Google Play), leave comments and even suggest topics. Over 50,000 listeners have tuned-in to learn and prosper.
