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