Using a Self-Directed IRA to Purchase Property

When investing in real estate with a self-directed IRA, there are a few rules the account holder needs to be aware of so they don’t get penalized. Here are five rules pertaining to purchasing real estate through an IRA:

  1. Cannot be Owned or Rented by Disqualified Persons

An IRA cannot purchase a property already owned by the account holder. It is also prohibited from purchasing property or selling property to disqualified persons. A Disqualified Persons cannot rent the property from the IRA, this created a prohibited transaction. Visit the Mountain West IRA website to learn more about who is considered a disqualified person.

  1. No Indirect Benefits

The account owner cannot use the property the IRA has purchased for a vacation home or as an office space for themselves. Investments are for benefits at a later date, not right now. If the property in some way benefits the account holder or a disqualified person, that is considered an “indirect benefit.”

  1. Titles

Account holders need to view their IRA as a separate entity. As such, investments are titled in the name of the IRA, not the investor themselves. Properly titled investments make the transaction clear and easy to follow when purchasing real estate in an IRA.

  1. No Out-of-Pocket Expenses

Every expense related to the property in question must be paid for through the IRA. This includes improvements, taxes, home owner’s association fees, maintenance, and more. Paying for such items outside of the IRA could lead to penalties.

  1. Buying Real Estate

With a self-directed IRA, the investor does not have to purchase the property outright for the full amount. Options like partnering with others or using a mortgage are also available.

For more details on the process of investing in real estate with a self-directed IRA, visit the Mountain West IRA website.

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About Mountain West IRA

Traditional approaches to retirement investing lead many otherwise savvy investors to overlook one of the most lucrative wealth-building strategies available: self-directed tax-free and tax-deferred investing in alternative assets. Investors in the know have learned, and you can too, that under your direction, your self-directed retirement plan can invest in real estate, notes, limited partnerships, and many other assets. With the great tax advantages provided by a self-directed IRA or 401(k), as well as the wider range of possible investments, you can potentially build wealth and secure your future much more effectively than you can through traditional plans. Mountain West IRA has been showing individuals and small businesses how to take advantage of self-directed retirement plans for over a decade. With a knowledgeable staff and our clients’ best interests in mind, we offer the outstanding customer service that only an independently owned and operated administrator can. The owners have combined experience in the IRA and retirement planning field of 48 years. Our accounts provide investing freedom and simple processes to allow you to maximize the effectiveness of your investments. For more information, please visit our frequently asked questions.
This entry was posted in Individual Retirement Accounts, IRA, Real Estate Investments, Self Directed IRA, Self Directed IRA Rules, Uncategorized and tagged , , , , . Bookmark the permalink.

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