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Why Buy Income Property with Your IRA & How?

Kathy Fettke

Kathy Fettke


Managing your Individual Retirement Account (IRA), may seem daunting. Stocks, Bonds, Options, Mutual Funds… the possibilities are endless. Likely, your retirement advisor is steering you towards safe, low yield investments. And while you want high rewards, if your retirement is tied up in the stock market, that comes with high risk.

Why Self-direct Your IRA to Buy Property?

That’s why so many of our members at RealWealth have decided to Self-direct their IRA’s for more diversification. It opens up a world of possibilities, including real estate.

A fixer upper, an office building, a rental in the next state, or a multifamily apartment building are just some of the options for building real and substantial wealth within your retirement account.

Of course, the government has very specific laws about what you can and cannot do within a Self Directed IRA. Complicated tax rules abound and penalties exist, so only go this route after hiring a trusted advisor.

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long term investing


For example, if you bought a vacation home, you could not use it personally. It can only be treated as an investment property. If you bought a fixer-upper, you could not do the work yourself, but instead would need to hire contractors unrelated to you. You can get financing, but it must be non-recourse.

Following the IRS code may seem daunting, but that’s what professional Self Directed IRA companies are for. The trustee or custodian will hold and direct the assets and file the necessary paperwork with the IRS. Every state has Self Directed IRA companies that know the tax code and provide services to keep you within the law.

The first question to ask is, “How much house can I afford?” All cash deals are common with Self Directed IRA’s, but if you need to borrow money, know what it is going to cost. Making sure the deal will pay for itself and then some is important.

An important note – while several high caliber self-directed IRA companies are available and work within the law, most don’t provide oversight on actual investments. As the owner of the account, you take the responsibility for researching your investment options and making sure the deal is solid. That’s why it’s important to have an experienced team of advisors to help you.

After interviewing and hiring the services of a custodian company and rolling over your IRA into a Self Directed IRA, you’ll need to find an investment. It’s estimated that 30% of self-directed IRA money is still sitting in the bank. Perhaps those people just haven’t found the right investment or don’t have time to deal with it. Don’t let that be you!

If you are busy, the most passive real estate investment would be a syndication, which is a “group investment.” An experienced operator manages it and you simply invest your money. In this case, your job is to do your due diligence on the operator, since he or she can make or break the deal. At RealWealth, we partner only with highly successful syndicators, ideally who have over 30 years experience with many profitable projects under their belt.

Kathy Fettke
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