self directed ira for real estate

It’s The Most Opportune Time For Investing In Real Estate With Your IRA

As a matter of fact, real estate is experiencing a 30-year low at present in most markets. Recently, the Wall Street Journal, New York Times, and a myriad of other publications out there were full of stories about the big Wall Street companies leaping into action and purchasing real estate rather than stocks. The companies were quite aware that they would receive high returns on their investment.

Now, the question arises why are the majority of Americans still trusting their IRAs…401Ks…with the stock market?

The answer is simple, they are ignorant about a better option.

Before we delve more into this topic, we want to make it clear that we are not financial advisors and thus, the information here should not be taken as financial, tax, or legal advice. It’s simply for information purposes only. So, we would like to say that you should consult your personal financial advisor prior to making any financial decisions or choices like the one here.

The Self-Directed IRA for Real Estate

There’s a type of retirement account referred to as the Self-Directed IRA. They’ve been around for quite some time now. Many people over the past several years have recognized that their IRA’s aren’t paying them any returns, rather they are even making them lose money at times. Consequently, those people (probably you are also one of them) have started to search for better investment options to increase the returns on their respective IRAs.

Explore the “Self-Directed IRA.”

A self-directed IRA can be simply described as a type of retirement account that offers the same tax benefits as a normal IRA. The difference lies in that here you have a greater flexibility and choice, as to where you want to invest your IRA deposits, in comparison to a routine IRA.

You can invest in…

•    Real estate (commercial, income generating rental property, rehabs, etc.)
•    Promissory Notes secured by mortgages (i.e. – private lending)
•    Tax lien certificates
•    Limited partnerships
•    LLC’s
•    Sub-C corporations
•    Real estate options
•    Some types of precious metals
•    … and the normal investments like stocks that your normal IRA can invest in

These are a good number of options indeed. You can buy investment real estate with your IRA or you can become a private lender in real estate.

What Are The Restrictions, If Any?

There surely are restrictions like in any other financial transaction or investment. There are restrictions as to what you do with your real estate if you buy and retain it; what type of precious metals; and many a time, the “custodian” of the SDIRA impose restrictions pertaining to what you can and should invest in.

Don’t know who is a custodian? Never mind, we will tell you that.

Self-Directed IRA Custodians

The US Government made the provision of SD-IRA in order to help the investors in gaining further control over their investments while getting the tax benefits as usual. But the government, obviously, don’t want the people to set up their SD-IRAs and just do whatever they wish to. That’s why they, as it were, placed a barrier in the way of investments, which we know as the custodian.

The custodian is generally the Self-Directed IRA Company, with whom you have your IRA. These custodians act as an intermediary or probably a regulator when you decide to make an investment. Most of the custodians have set guidelines regarding what you can invest in, how long it will actually take for you to get the ROI once they approve the investment, and so. There are some custodians who are rather passive; they allow you a checkbook and writing checks from your SD-IRA for making investments.

You should make your preparations beforehand, do some research, and carefully decide on the most appropriate custodian for you. While deciding, you should consider factors like some custodians charge more than others, whereas some provide relatively more flexibility.

Some Important Questions You Should Ask To A Self-Directed IRA Company Before Partnering With Them

1.    What is your fee? – The fee of an SD-IRA company may vary greatly. There are some who charge an annual fee based on the value of the account; some charge a flat annual fee; then again, there are several companies who require a large setup fee; and so on. You have to think over this and figure out what works the best for you. The one thing you must ensure is that your ROI on the real estate investment with your IRA should comfortably compensate for the fees paid by you.
2.    What process do you follow to approve an investment? – There are some companies that can take over 30 days to fund an investment after being sent for approval. While some SD-IRAs offer to you “checkbook control,” which enables you to write checks from your IRA Account for making investments; this method is far better as it provides immediate funds and speeds up the deal closing process. Though the checkbook control option is somewhat expensive than the other option, it saves considerable time. Ultimately, you have to decide which option is better for you based on your needs and preferences.
3.    What are the restrictions, if any, regarding my investment choices? – Say you want to invest in real estate and make private loans. There are some SD-IRAs, usually with larger and more traditional companies such as Charles Schwab and Smith Barney, who impose certain restrictions on what your account can invest in. There are some who don’t permit an investment in real estate, while other’s do. Just be clear about that.
4.    Can my retirement account be rolled over into an SD-IRA? – Though most retirement accounts and even some 401Ks can be rolled over into an SD-IRA, this cannot be done with all retirement accounts. So, you should enquire into it and ask your financial advisor and the representative of your prospective SD-IRA company.
5.    How much time should I expect for my account to be active and functioning, and have funds readily available for making an investment(s)? – Some people wait too much before they invest. However, if you want to use your IRA for investing in real estate, you should initiate this process at the earliest; as soon as your account gets rolled over into an SD-IRA. Some companies may take several weeks or even more than a month at times in activating your account and making it ready for investment. Therefore, instead of waiting until you’ve hit a great real estate deal, you should start from now so that you have funds ready at hand by the time you need them.

Go Ahead And Put Your Money On Work To Fetch Returns

If you are quite confident that a self-directed IRA could provide you with a great option to invest a part of your retirement into the things of your choice, apart from the unpredictable stock market, then just go ahead. But before investing your hard-earned money, you should invest considerable time in getting familiar with SD-IRA, its merits and demerits, so that you can take an informed decision. (The websites that I have mentioned above provide a great way to start. These websites contain valuable resources for learning about SD-IRAs and how they can be effectively used to make investments in real estate).

If you have any queries regarding how you can associate with us as an investor, feel free to contact us through our inquiry form or call us 24/7 at 203 930 8500. We will get back to you at the earliest. We offer discounted investment properties in Connecticut and neighboring areas to the investors like you, who are interested in buying them and retaining them as rentals. We also work with those qualified investors who are willing to deal in private landings. You may contact us anytime for getting more information on private landings as well.

We’re available here round-the-clock as your very own resource, so don’t hesitate to contact us anytime. Wish you a happy and safe investing!