Self-Directed IRAs with Real Estate: The Process
Broad Financial makes it safe and simple for you to purchase Real Estate with your Self-Directed IRA and 401k funds. Here’s how it works:
- When you set up your Self-Directed IRA or Solo 401k, you’ll also be opening an accompanying checking account at the bank of your choice. This checking account will serve as the platform for you to purchase and manage investment properties.
- When you’re ready to purchase a property, just write a check from your dedicated account. (Yes, it’s that easy.)
- All deposits (rent checks, proceeds from sales, etc.) are made directly into the checking account, and all expenses (mortgage payments, real estate taxes, capital improvements, utility bills, repairs, etc.) are paid from the same checking account.
- In short, the property is owned by your IRA or Solo 401k, it is managed by you (on behalf of your IRA or Solo 401k), and all transactions go through your IRA or Solo 401(k)’s checking account.
The Advantages of Self-Directed IRAs for Real Estate
- Financial Agility – Checkbook control allows you to purchase foreclosures, tax liens, and other on-the-spot investments as soon as they are presented.
- Hassle Free – Your dedicated checking account provides a one-stop destination for all of your transactions. This obviates the need for third party requests that can cause delay and frustration in your real estate purchases.
- Safety – The checking account for your Self-Directed IRA or Solo 401k will be set up by you, at your bank, so it will always be under your control.
Self-Directed IRA Real Estate Rules and Purchasing Restrictions
Although there are no limitations on the type of real estate your Self-Directed IRA or Solo 401k may purchase, there are several restrictions in terms of ownership and servicing that the potential investor needs to consider.
- Your Self-Directed IRA/Solo 401k may not purchase a property that you own. Similarly, you cannot buy a property that your IRA/Solo 401k owns.
- You cannot live in, or vacation in, a property that your IRA/Solo 401k owns.
- You cannot hire a business owned by a disqualified person to provide a service to your IRA/Solo 401k owned property. In other words, if your IRA owns a rental property, you cannot hire your dad’s roofing company to replace the roof.
- You cannot receive a salary for managing the property. However, you may perform managerial services without charging your IRA or Solo 401k a fee. (These duties fall under your responsibilities as the non-compensated manager of the LLC or Trustee.)
- You cannot perform physical work to a property that your IRA or Solo 401k owns, e.g. you cannot replace a damaged roof by yourself. The reason for this restriction is that the work would be considered a non-cash contribution to your IRA or Solo 401k which is prohibited.
All You Need to Worry About is Your Investing Strategy. We'll Handle the Rest
When thinking about making the move into real estate IRA investing, Broad Financial makes it as easy possible. We take complete care of your LLC creation, so you're only focus can be on investing and not administrative processes.
Contact a Self-Directed specialist today to get started.