More and more people are now using their IRA funds to make profitable real estate investment. It means that they can invest some money in a piece of real estate and earn the returns of the same, years later. The main advantage of this kind of investment is that the investor doesn’t have to pay taxes. If you are interested in this you can consult your tax analyst and your real estate agent. Brainstorm on this because it is a very complicated process and doesn’t come so easily. The first thing that you have to do is to establish a self-directed Roth account. To do this you will have to consult a limited liability company to hold the assets for you. As a second step, you will have to hire a plan administrator who will allow you to use your retirement funds, primarily, to buy real estate. Of course, there are people who invest in gold and silver as well, but real estate is lucrative and once you see a profitable property, you can convince the plan administrator, and you can take off from there.
If you took special liking to a particular property, and you don’t have sufficient IRA funds, then you will have to open a second retirement account and start putting funds in that; the amount will be decided by the IRA. If you select solo-401(k)s option, then you can put in as much as $51,000 every year. If you hold a regular retirement account, then you can convert it to a Roth-type account, but it may take a few years.
Keep in mind a few things when you buy investment properties with IRA:
- You cannot buy a personal property or a second home with the IRA, it has to be a business property. This rule extends to your family members too.
- Expenses related to the property (example, repairs and upgrades) will have to come from the IRA account. You cannot use your personal credit card.
- If you want to buy a rental property, then you will have to open an IRA custodial account. You can transfer this amount from your current IRA account and buy the property under IRA. IRA has certain rules that you have to follow while buying properties, including, regarding its funding and managing procedures. The rental properties held in the IRA must be managed by third-parties.
- Suppose you are interested in the flipping business, you can buy and sell in the self-directed IRA, but of course, there are limitations on how much you can do in a year. The profits that you earn will be tax deferred. This is a profitable way to let your IRA grow.