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