Real Estate IRA Rules
Seven Things You MUST Know about Investing in Real Estate IRAs
Basic Rules to Guide Your Investing
1. Your IRA Cannot Purchase Property Owned by You or a Disqualified Person.
One of the most common questions about real estate IRAs is: “Can my IRA purchase a property that I currently own?” The answer is always no.
IRS regulations don't allow transactions that are considered "self-dealing," and they don't allow your self-directed IRA to buy property from or sell property to any disqualified person, including yourself.
2. You Cannot Have “Indirect Benefits” from Property Owned by Your Self-Directed IRA.
Can your self-directed IRA purchase a vacation home for you to occasionally use? Can you rent office space for yourself in a building that your self-directed IRA owns?
The purpose of the IRA is to provide for your retirement at some future date. It's not intended to benefit you (or any other disqualified person) today. If your IRA engages in a transaction that, in some way, benefits you or a disqualified person, this is considered an "indirect benefit".
3. IRA Investments Are Uniquely Titled.
You and your IRA are two separate entities. As such the investment needs to be titled in the name of your IRA—not to you personally. All documents related to the investment must be titled correctly to avoid delays.
The correct title for most real estate IRA investments is:
"Equity Trust Company Custodian [for benefit of] (FBO) [Your Name] IRA"
4. Real Estate in an IRA Can be Purchased without 100% Funding from Your IRA.
You can purchase property in more ways than just an outright purchase of the full amount from your account. These other options include using undivided interest and partnering with others. You can also finance an investment with your IRA, but it must be structured properly.
5. IRA Investments that Use Financing Must Pay UBIT.
Your self-directed IRA can purchase real estate using financing as long as the loan is non- recourse. If you do use financing, unrelated business income tax (UBIT) applies.
6. Expenses Must Be Paid from Your IRA.
All expenses related to property owned by your self-directed IRA (maintenance, improvements, property taxes, condo association fees, general bills, etc.) must be paid from your IRA.
7. Real Estate IRA Income Must Return to Your IRA.
All income generated by property owned by your self-directed IRA must be paid into your IRA.
Please Note: This information presented above is for educational purposes only and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with legal, tax, and accounting professionals.
Buyer: "I love the dialogue between the counter and the backsplash"
Please, get me out of here.
BUY REAL ESTATE WITH YOUR IRA !
An opportunity to increase your rate of return and diversify your self directed IRA portfolio.
Please read, below, seven things you must know before investing in real estate using the funds from your IRA.
KEEP YOUR HANDS OFF !
You, as the investor using your IRA to buy real estate cannot be involved in any part of the property other than selecting the property and suggestions on any renovations or repairs, if needed.
A "Custodian" for your account is used for all aspects of IRA Real Estate investing. The Custodian charges fee for its services.
Old Towne Realty (OTC) will provide assistance, if needed, selecting a third party Custodian. A custodian is usually an investment or asset management company.
OTC will help you select the property that fits your investment needs. OTC is paid a commission by the seller so this is a free service to you.
OTC will provide and supervise licensed and bonded contractors or sub contractors to perform any needed repairs or renovations of the property. In most instances these repairs or renovations are intended to increase the value of your asset. OTC charges a small supervisory fee for this service, which is paid through your IRA account.
OTC provides Property Management services for your investment. We only manage our clients properties. OTC will advertise, screen tenants, collect rents and pay all operating expenses for the property. All rental income is paid directly into your IRA account. OTC charges a competitive fee for this service.
OTC will list, market and sell your investment property when instructed to do so, by you. OTC charges a commission for this service. The commission varies depending on the type of investment (Retail/Office/Industrial, Multi-Family or Residential). Our commissions are always below market for our clients.
All of the proceeds from the sale are paid directly back into your IRA account. A return, usually, much higher than banks or stocks.