Investing in Real Estate with Your IRA
Presently, real estate is at a 30 year low in many markets. If you read publications like Wall Street Journal, New York Times, and countless others, you must have noticed that there have been stories concerning big Wall Street companies investing in real estate and buying properties rather than stocks…because they are aware of the opportunity in real estate and believe they can get better return. In addition, they know that real estate is third in creating the most millionaires in the United States.
You may want to ask why most Americans still trust their retirements, IRAs, 401ks with the stock market?
The answer is simple, they are still naïve, they don’t know any better.
The Self-Directed IRA for Real Estate
There is something known as a Self-Directed IRA. IRA has been in existence for a longtime now… and lately many people have realized that their IRAs are not making them any money and some even realize that they are even losing money. And those people (perhaps you are in this category of people) have started to make research for other ways to earn better returns with that same IRA.
Enter the “self-directed IRA”.
A self-directed IRA is simply a retirement account with the same tax benefits just like a normal IRA… but, this gives you more flexibility in making decision on what you want your IRA to be invested in.
Your IRA can be invested in…
- Real estate (commercial, income generating rental property, rehabs, etc.)
- Promissory Notes secured by mortgages (i.e. – private lending)
- Tax lien certificates
- Limited partnerships
- Sub-C corporations
- Real estate options
- Some types of precious metals
- … and the normal investments like stocks that your normal IRA can invest in
What this does basically is to open it up so you can buy investment real estate with your IRA or become a private lender in real estate.
Are There Restrictions?
Yes, there definitely are some restrictions. You are being restricted on what you do with the real estate after you have purchased and hold them… the types of precious metals… and most times the “custodian” of the SDIRA has restrictions on what they think you can and should invest in.
What is a custodian?
Self-Directed IRA Custodians
The US Government established the SD-IRA loophole to assist investors have more control over their investments while still getting the tax benefits. But, at the same time they do not want people setting up these SD-IRAs and doing anything they like.
So they created the custodian to act as a barrier.
The custodian is the Self-Directed IRA Company that holds your IRA. They act as the “go between” when you are going to carry out an investment. Many custodians have their own guidelines on those things you can make investment in, the duration it will take for you to make your money work for you once the investment has been approved… etc. we have some custodians that are more passive, and provide you with a checkbook that you can use to write checks from your SD-IRA to make investments.
You are required to carry out research to know the custodian that is best for you. Below are a few that we know and respect:
- Guidant Financial (expensive, but gives you true checkbook control, which is huge) – https://www.guidantfinancial.com
- Equity Trust – http://www.trustetc.com/
- Entrust – http://www.theentrustgroup.com/
Ensure you carry out some research to get the one that is right for you.
There charges vary, some charge more than others… and you get more flexibility from some than others.
What To Ask A Self-Directed IRA Company Before You Work With Them
You can use the questions below as a guideline before signing up with a SD-IRA company… ask them a few key questions.
- What are your fees? – IRA companies charge different fees. Some charge an annual fee based on how valuable the account is, some charge an annual fee, others charge large setup fees, etc. Make research on what works best for you. But, the idea is that when you are able to invest in real estate with your IRA… you will make up for the fees you are paying and still get higher return on your investment.
- What’s the process for approving an investment? – Some IRA companies can take as long as 30 days or more to fund an investment after sending it in for approval. Some SD-IRA’s provide you with what is referred to as “true checkbook control”, where you actually get a checkbook where you can write checks from your IRA account… and this gives you instant access to the funds (for you to be able to close a deal quickly). Usually, checkbook control is more expensive to set up than an IRA account which requires all investments to pass through the usually lengthy custodian approval process, but again… find out what’s best for you.
- Are there any restrictions on what I can invest in? I want to invest in real estate and make private loans. – SD-IRAs with larger traditional companies like Schwab and SmithBarney places restrictions on the type of investment you can make. Some may not allow you to invest in real estate… while others will. Just ask.
- Is my retirement account eligible to “roll over” into a SD-IRA? – Not all retirement accounts can be rolled over into a self-directed IRA. Although most IRAs can be… and even some 401(k)s can be. Contact us to find out if your IRA is eligible to roll over into a Self Directed IRA.
- How long will it take for my account to be up and running and have funds available for investment? – Most people wait too long before they start this process. If you are willing to use your IRA to make investment in real estate… start the process on getting it rolled over into a SD-IRA account immediately. It may take weeks or even over a month for some companies to set up your account and ready to invest. Therefore, do not wait until you have found a great real estate deal before you start… start the process today for your funds to be ready to invest anytime you need them.
Do Not hesitate to Let Your Money Start Working for You
If you believe that a self-directed IRA is a great way for you to invest part of your retirement in something you know instead of the unpredictable stock market… then take action immediately, ensure you take time get to educate yourself on the advantages and disadvantages of a SD-IRA (you can get started with the websites listed above. You can get good resources and materials to learn more about self-directed IRAs and the way you can use them to invest in real estate.
If you have any questions on how you can partner with us an investor… Just contact us through our contact form or put a call across to us anytime at: (323) 380-5853. Home Solutions offers discount investment properties in Los Angeles, Beverly Hills, Woodland Hills, Encino, North Hollywood, Hollywood, West Hollywood, Thousand Oaks, Diamond Bar, Pomona, West Covina, Arcadia Heights, Westwood, West Los Angeles, Phoenix, Glendale, Scottsdale, Paradise Valley, Mesa, Tempe to investors like you who usually acquire and keep them as rentals. If you are a qualified investor and would like to learn how to make double of what most other investors are making with their investments ask us about private lending… Contact us and we will tell you how we make that happen with our private lenders and possibly you.
Happy investing! We are always here and ready for you so feel free to contact us anytime