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No I was not suggesting any CPA would suggest it. I understand from a CPA tax stand point this would never be a good idea. But if you really thought real estate was going to go up in an area I am thinking it might make sense. If you bought
a house or condo for rental with IRA money for $100,000 and within 5 years it was worth $150,000 and you sold it you could defer the tax on $50,000 plus the rent until you took money out of your IRA. I also understand you need a property management to take care of everything and send the rent to your company running your IRA, etc. You cannot be involved. I just exploring the option as stock market is so hard to make money and I believe there still good options in for Florida with amount of people retiring every day. Please let me know if you think I am off base.
Are you considering using a self directed IRA because that is your only source of money for some particular real estate target you have in mind? I have to tell you, self directed IRAs really have some significant disadvantages that might be hard to overcome (mathjak listed some). If you have a particular area of investment that you have interest and IRA money is what you want to use, you may want to check on REITs, use this as a guide to pick some https://www.reit.com/investing/inves...able-directory
Isn't this a favored strategy of the people who go town to town doing seminars on buying real estate? Why aren't they buying real estate instead of doing seminars?
I have done this. There are some pretty specific rules around this, if you do it you do need guidance and have a lawyer or company do all the paperwork for you to make sure that you are in compliance with all the IRS rules.
I have found it to be a good investment and mine has outperformed the stock market since I have purchased it. There are some pitfalls, you just need to understand what they all are and be in a position to cover them.
As some have mentioned, you cannot add money to the account if you have a shortfall, and the IRS rules pretty much eliminate using a loan to purchase anything.
Are used guy didn't financial to get all my stuff set up. I think the trust company charges around $500 per year. Everything else I do myself. Buying and selling is done through normal real estate channels. Nothing paid to the trust company.
I have done this. There are some pretty specific rules around this, if you do it you do need guidance and have a lawyer or company do all the paperwork for you to make sure that you are in compliance with all the IRS rules.
I have found it to be a good investment and mine has outperformed the stock market since I have purchased it. There are some pitfalls, you just need to understand what they all are and be in a position to cover them.
As some have mentioned, you cannot add money to the account if you have a shortfall, and the IRS rules pretty much eliminate using a loan to purchase anything.
A self directed IRA can borrow money and can even lend money
not very easily . finding banks to get involved loaning for real estate in a self directed ira can be challenging and expensive .
Lending Guidelines
This type of loan is higher risk to the lender, and their underwriting policies are going to me more conservative as a result. Typical guidelines you might find are as follows:
Down payment of at least 30%. Condos as high as 50%
10% – 15% cash reserves in the plan at the time of the loan
Terms range from 5/1 arms to 25 year fixed rate loans
Rates will generally be 1% – 1.5% higher than a typical investor loan with a personal guarantee.
i can see zero reason to get involved doing this when the best perks of real estate investing are taken out of the equation . no tax benefits , no depreciation , risks of needing cash and paying high prices for loans .
Isn't this a favored strategy of the people who go town to town doing seminars on buying real estate? Why aren't they buying real estate instead of doing seminars?
The same reason why stock market experts make their money selling books, tapes, courses or brokerage or wealth management services instead of putting their own dough in the stock market. . . . .
not very easily . finding banks to get involved loaning for real estate in a self directed ira can be challenging and expensive .
Lending Guidelines
This type of loan is higher risk to the lender, and their underwriting policies are going to me more conservative as a result. Typical guidelines you might find are as follows:
Down payment of at least 30%. Condos as high as 50%
10% – 15% cash reserves in the plan at the time of the loan
Terms range from 5/1 arms to 25 year fixed rate loans
Rates will generally be 1% – 1.5% higher than a typical investor loan with a personal guarantee.
i can see zero reason to get involved doing this when the best perks of real estate investing are taken out of the equation . no tax benefits , no depreciation , risks of needing cash and paying high prices for loans .
If I decided to invest this would be a cash transaction. I have plenty in my IRA to use a portion
for a real estate transaction. I would be looking for something around $100K or less. Really
looking at something that would have appreciation. Florida still have some very good properties
values with lots of people looking at retiring and moving to Florida. Just need to do lots of
homework before going forward.
Location: Stuck on the East Coast, hoping to head West
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The point of an IRA is to DEFER taxes.
The main benefit of investing in real estate (assuming that you mean to rent out) is that you'll have positive cash flow and tax FREE earnings (because of the magic of depreciation, cost segregation will shield these earnings ) AND the ability to offset other income with paper losses (again, thru depreciation) or carry them forward.
You need to discuss this with a CPA who practices in this area. At the very least read Tom Wheelwright's book to get a start on understanding.
If you're talking about using an IRA withdrawal to buy a primary residence that's a different issue.
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