Self-Directed Individual Retirement Accounts (IRA) Real Estate Investing

Stocks, bonds, mutual funds, and other conventional investments are commonly held in regular Individual Retirement Accounts (IRA). Self-directed IRAs provide many more options.

A self-directed IRA is similar to a standard or Roth IRA in that it allows you to save for retirement while avoiding taxes, and it has the same contribution restrictions. The only difference between a self-directed IRA and a traditional IRA is your assets in the account. 

Self-directed IRA real estate investing is an option if you’re looking to expand your investment opportunities. You can read about how we help you understand this concept and make the most of your self-directed IRA.

The Best IRA for Investing In Real Estate

Alternative investments are accepted or offered by the IRA custodian, financial institution, or firm responsible for record-keeping and Internal Revenue Service (IRS) reporting requirements under the name “self-directed.” A self-directed IRA is unaffected by any brokerage, bank, or investment firm making decisions for you (most brokerage accounts don’t allow real estate holdings anyhow).

To buy and own property with your IRA, you’ll still need a custodian, a company specializing in self-directed accounts and handling transactions, paperwork, and financial reporting. Keep in mind that you and your IRA are two different entities. Your IRA, not you, owns the property. “XYZ Trust Company Custodian [for the benefit of] (FBO) [Your Name] IRA,” the property’s title will say.

Owning The Real Estate Property You Invested In

You can only use the real estate property as an investment. It cannot be used as a holiday home, a home for your children, a second home, or a business office. These regulations apply to both you and others who the IRS considers “disqualified.” Disqualified individuals include:

  • Your partner
  • Your grandparents, great grandparents, and parents
  • Your children, as well as their wives,
  • Your IRA’s service providers
  • Any entity that owns more than 50% of the property is considered a majority owner.

You can’t take advantage of the deductions that come with owning real estate because your IRA doesn’t pay taxes. There are no mortgage interest payments to deduct because you paid cash. 

You also miss out on property tax deductions and depreciation. If your home provides rental income, you can put all of it into your IRA. You can’t keep any income because you don’t technically own the property.  

On the plus side, you are not responsible for any maintenance or other associated expenditures of owning real estate. More often than not, maintenance and repairs can be costly and take up a big chunk of their funds. 

However, you can find comfort knowing that the IRA covers everything. However, this is not without drawbacks, of course. It’s best to do extra research and talk to a professional real estate investment firm for guidance. 

What Are Some Risks Of Self Directed IRAs?

There are substantial risks to be aware of when considering a self-directed IRA, and some of them are as follows:

  • Restricted transactions
  • Due diligence
  • Steep fees
  • Lack of liquidity
  • Lack of transparency
  • Fraud 
  • Concentrated portfolios

How To Choose A Real Estate Investment Firm

Concentrate on the past. An investing business that has participated in hundreds of transactions will know what will (and will not) work. Saint Investment is one renowned investment firm that has participated in hundreds of credible and successful transactions. It’s not just about making purchases and selling them; there’s a lot of work to be done.

Match your objectives to the company’s portfolio. Some investment firms only work with properties that are for sale. They’re ineffective if you want to buy a rental home as an investment since some companies exclusively deal with commercial properties.

Leave It To The Pros At Saint Investment

Professionals at Saint Investment are backed by years of investing expertise and founded by the high net-worthy investment partners. Using dependability, flexibility, and performance as basic foundations of their operational strategy, Saint Investment brings unique commercial real estate investment terms to the real estate world. 
Cover all your bases with trusted professionals at Saint Investment and learn more about how to invest in income funds by scheduling a free consultation with our team today!