Why Invest Your Real Estate in IRA?

If you are a successful real estate investor or if you are searching for diversity in your retirement portoflio, you will find a great potential in combining IRA and real estate.

A self-directed Individual Retirement Account (IRA) enables you to purchase assets like notes, commercial paper, limited partnerships and real estate. With the self-directed IRA, you can have the complete control in directing or choosing which investments that you want to make. A self-directed IRA invested in real estate is called real estate IRA. The self-directed IRA administrator or custodians are the ones who handle the documents required for establishing your account and to buy the investment. The easiest way to add real estate in IRA is purchasing the property with funds from your IRA.

There are six reasons for you to think of adding real estate to your self-directed IRA:

1. Go for something you already know. If you have experience and know more about the property investing field, this is one of the great opportunities that you can take advantage of to boost your tax-deferred retirement resources.
2. Buy your dream retirement home now and add it as asset in your IRA. You can obtain the house through IRA funds and you can lease it to generate profit for your IRA until your retirement.
4. You will have to expand your retirement assets. You will feel more secure if you expand your portfolio with a selection of assets that will help you get the most of your retirement.
4. Favorable tax treatment. Gains and income made out of your IRA investment will go back to your IRA tax-free. By using self-directed IRA to build investments, the owner of IRA is able to suspend taxes on investment returns, hence allowing IRA owner to gain from tax-free growth.
5. Potential increase in asset and cash flow. One of the few solid assets that can produce income within your IRA is real estate investment. Similar to other investments, it may eventually appreciate in worth over time.
6. Preference for tangible assets. Real estate in IRA is the best choice for you if you like the thought of walking around a piece of land, walking inside a home or an apartment. However, you, your family members or other parties may still not use the property while it is IRA-held.

Kinds of Real Estate Properties

There are several types of real estate in IRA, and these include single family homes, apartments, townhomes, and other multi-unit homes. Other options are parking lots and garages, developed or undeveloped land, student housing and condominiums. You can also include timeshares and fractional ownership properties in your choice of investment.

What are other things that should you consider before investing in real estate with your IRA?

Although real estate in IRA is not suitable for everyone as a retirement investment, it should still be considered as another shot at your retirement venture alternatives. Like any other investments, real estate has advantages and disadvantages.

There are other important things that you should look into other than just being aware that a property is an asset in your retirement plan:
a. Getting the property as a share from your retirement plan is your key profit.
b. You still cannot charter it to your business, given that the property is still held in your self-directed IRA (SDIRA).
c. You and/or your family members are disqualified to lease or occupy the property.
d. The property you plan to purchase from IRA funds can't be owned by you, your spouse or your family and the transaction should be legal.
e. As with all investments, the value of the real estate may also change.

It is also vital for you to consult with legal counsel, real estate agent, financial advisor, accountant, or other professionals who are knowledgeable in this topic. Real estate in IRA is only one of the many methods of investments that can be purchased with your self-directed IRA.