By Chris Harter
Can I use my IRA to buy an investment property? Using your IRA as a tax-deferred protective shield allows you the benefit of diversification of assets and potentially higher returns through your real estate investments. While you cannot purchase property you already own under the rules, when you retire, what once served as one of your tax-free or tax-deferred golden eggs can then be dispersed to you to enjoy as your golden retirement nest.
Sound appealing? This opportunity to direct cash home buyers in Omaha and Council Bluffs is very often overlooked and underused in the real estate market in general. Investing through an IRA is appealing to many investors because it means that you will be the one sitting in the driver’s seat.
Perhaps you are a newcomer to the real estate investment market, not to worry. The subject of using IRAs to purchase investment property should pique your interest. As you grow in experience, you can better understand your investment options to better your retirement years. Or, should you specialize in the investment sector with solid negotiation skills, and you’ve been wondering this very thing, we will be exploring ways to use your IRA to purchase investment real estate in Omaha and Council Bluffs.
Rules
The restrictions on using an IRA to purchase investment real estate in Omaha and Council Bluffs do not differ from those on any other IRA guidelines regarding the type of assets that the IRA can hold. You should be aware this must remain strictly investment property. Any expenses or income must flow solely through the IRA. You and your spouse, along with direct line family members, cannot use the real estate personally, not even for one night. Additionally, you should not be involved in the deal in any way other than deskwork, avoiding any IRS sweat equity questions.
Self Directed IRA
Self-directed IRAs (SDIRA) used to purchase investment real estate in Omaha and Council Bluffs are individual retirement accounts over which you have complete control of the investment. You can invest for the long term, holding rental properties, vacation rentals, flip, or any other real estate investing area that may be your niche. You could find your dream retirement home now, having your custodian purchase the property through the IRA, which owns it as an investment. Naturally, you should explore this option carefully with a certified CPA to roll over your other IRAs and to ensure that this type of retirement account best suits your circ*mstances,
Cash
The best-case scenario to purchase investment real estate in Omaha and Council Bluffs is that you have the cash funds in the IRA to buy the property outright in cash. Partnerships are another option, as long as your partner isn’t a disqualified family member. The other option is to obtain financing, with two primary considerations. Firstly, the loan must be non-recourse, which means the lender can only go after the physical property and not the IRA in the case of default. And secondly, Unrelated Business Income Tax (UBIT) would be due on the amount of the rent collected on a rental property, for example. Because an IRA is considered a trust, this tax would be at the trust rate.
Expenses of Ownership
Typically, a custodian manages the IRA on your behalf. When you find a subject property, while there may be the inconvenience of waiting, they must handle all aspects of the investments, sign any contracts, make any earnest money deposits, collect rents, and the like. Your custodian would issue funds for all expenditures to purchase or own investment real estate in Omaha and Council Bluffs. You cannot buy materials to make repairs yourself and submit them for reimbursem*nt. It is convenient for many professional home buyers in Omaha and Council Bluffs to hire a property manager to consolidate their expenses. The IRA must pay costs for managing the property daily, from putting down the earnest money deposit right down to buying the lightbulbs.
Status
Remember, you must hire someone to do everything, from lawn maintenance to paying the bills. Keep everything at arm’s length and err on the side of caution. Ask your CPA if you have any doubt about a transaction or use of the property. The fundamental basis of using your IRA to purchase investment real estate in Omaha and Council Bluffs lies in the fact that this is considered a retirement account. You cannot actively receive income from the investment or change the status in the IRS’s eye on what purpose the investment is serving in your current annual income. Additionally, maintain extreme control of the property’s use by your relatives. Crossing these delicate and complicated lines will be considered a change in the status of the revenue. The IRS will distribute an IRA in January of the year the work or a disqualified transaction took place.
Harter Investments has the inside track on the best properties for you to build your IRA investment real estate holdings in Omaha and Council Bluffs. At Harter Investments, we buy houses in Omaha and Council Bluffs and we make sure our professional direct cash home buyers in Council Bluffs and Omaha will work together with you, but you should always contact your lawyer, accountant, or financial advisor before making a purchase! Call Harter Investments at 402-939-6556 or send us a message today or visit us at www.harterinvestments.com!
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