Real Estate IRA
What is a Real Estate IRA?
“Real estate IRA” is a term used to describe an IRA or 401(k) allowing real estate investment(s). You can use a Traditional, Roth, SEP, SIMPLE IRA or even a Solo 401(k),
- 10% Holdback on Brick & Mortar Real Estate Transactions
All expenses of IRA-owned assets must be paid for by the IRA. Paying real estate related expenses personally can lead to a Prohibited Transaction. The 10% holdback does not stop withdrawals and paying vendor bills. What it stops is new real estate IRA investments when you have real estate in the account. It is a red flag for us to look and ask the question as to how the account holder plans on keeping the property functional. The reserve funds are a way for us to make sure that you (account holder) can keep the property in good working order, pay taxes, repairs, etc. A minimum deposit of $325 is insufficient for this purpose. This holdback may be waived if the account holder has alternate qualified funding sources to keep the account in decent liquidity.
- Excluded States for Brick & Mortar Real Estate only:
Because of a variety of issues, we have encountered with the following locations we will no longer accept transactions on physical real estate (buying property directly) in the following areas: The State of Florida The State of South Carolina, The State of Maryland, The State of New York, Cook County, Chicago, Illinois, The State of Georgia.
With a real estate IRA, you can earn tax-free/tax-deferred returns on your real estate IRA investments.
What Types of Real Estate IRA Investments are Allowed?
The following is a partial list:
- Raw land
- Single-family homes
- Commercial property
- Apartments
- Duplexes
- Condos/townhomes
- Mobile homes
- Real estate notes
- Second mortgages
- Partial notes
- Real estate purchase options
- Tax liens certificates
The following are important real estate IRA rules to follow during your investment process:
- Your IRA Cannot Purchase Property Owned by You or a Disqualified Person
- You Cannot Put Any of Your Own Money into the Real Estate IRA Investment Deal
- You Cannot Have “Indirect Benefits” from Property Owned by Your Self-Directed IRA
- Real Estate IRA Investments Are Uniquely Titled
- Real Estate IRA Investments that Use Financing Must Pay UBIT
- Real Estate IRA Expenses Must Be Paid from Your IRA
- Real Estate IRA Income Must Return to Your IRA
- For more information, see Real Estate IRA Rules.
