| Maximizing Your Options: Self-Directed IRAs | | | | self-directed IRA for investment. |
| and Real Estate Investing The perception of | | | | |
| retirement savings is that the money has to | | | | When using a self-directed IRA to invest in |
| be invested in traditional avenues like CDs, | | | | real estate, you select the property, |
| bonds, stocks, and funds. However, there are | | | | negotiate the price, and find the lending |
| a large number of non-traditional investment | | | | institution, while an escrow account is |
| options that are available through an | | | | created in the IRA trustee's name and the IRA |
| increasingly popular type of retirement | | | | trustee performs the actual transaction. The |
| account, called a self-directed IRA. | | | | property is then held as part of the |
| Self-directed IRAs let the individual | | | | account's assets. This is analogous to |
| investor decide where to invest their money | | | | picking a stock with great dividends and |
| based on their own expertise - and one of the | | | | instructing your IRA advisor to purchase a |
| most common investments is in the | | | | certain number of shares. |
| opportunity-rich real market. | | | | |
| | | | What an IRA Trustee Means The structure of |
| How Real Estate Investing through an IRA | | | | self-directed IRAs provides a balance between |
| Works Individual retirement accounts (IRAs) | | | | independent real estate investment control |
| make up more than $2 trillion of investment | | | | and experienced investment professionals. For |
| assets, about 20% of the total assets in | | | | any self-directed IRA, there has to be a |
| retirement plans. While about 98% of these | | | | qualified custodian, or trustee, for the |
| IRAs are invested in traditional areas like | | | | account. The trustee understands all legal |
| mutual funds and stocks, a large number of | | | | and tax prohibitions on investments, manages |
| IRA holders are switching to self-directed | | | | the actual retirement account, handles |
| IRAs, which let them decide where to invest | | | | administrative tasks and carries out all of |
| their money. In fact, the amount of assets | | | | the actual transactions. The trustee also |
| held self-directed IRAs has more than doubled | | | | offers professional advice as you plan your |
| in the last five years, representing tens of | | | | investment strategy, which is particularly |
| billions of dollars in assets. | | | | important for long-term investing in real |
| | | | estate. All account funds are held in an |
| Most self-directed IRA funds are spent in | | | | escrow account managed by the trustee. |
| real estate, and virtually any kind of | | | | |
| property is allowed for investment: land, | | | | The self-directed IRA trustee has an integral |
| commercial properties, office buildings, | | | | role in whether you successfully invest in |
| shopping and retail centers, single family | | | | real estate with your IRA. Even major |
| homes, rental units, condos and multi-tenant | | | | investment companies may not have experience |
| buildings. The only limit for real estate | | | | with self-directed IRAs or real estate |
| investments is that they cannot directly | | | | investing, and knowledge matters. For |
| benefit the account holder or a near relative | | | | example, the profits from a self-directed IRA |
| (such as buying an investment property and | | | | may be subject to unrelated business income |
| then using it as your primary residence). | | | | taxes (UBTI) because of the nature of the |
| | | | investment, while depreciation and expenses |
| There are three different ways that IRA funds | | | | for the property are calculated differently. |
| can be invested in real estate: • By | | | | (This is in sections 511-514 of the IRS tax |
| purchasing the property outright. In this | | | | code.) An experienced IRA trustee will know |
| case, the assets in the IRA are used to buy | | | | all the liabilities and incentives available. |
| the property entirely. • By supplying | | | | |
| a deposit or down payment. The IRA fund can | | | | Most importantly, ask about investment goals |
| be leveraged to get a mortgage on a property, | | | | and options; get involved and be willing to |
| with the property used as collateral. This | | | | take control of your investments. The most |
| minimizes personal risk and can greatly | | | | important asset the IRA trustee offers is |
| increase the overall value of your | | | | strategic, experienced planning. Trust |
| investment. • By buying a property as | | | | Administration Services specializes in |
| part of an investment group. As long as the | | | | IRA-funded real estate investing, along with |
| property deed shows your undivided interest | | | | other self-directed IRA investment plans, |
| in the property, it's available to your | | | | with billions of dollars in assets. |