Real Estate IRA FAQs

Long gone are the days where the only options you had for your retirement savings accounts were company sponsored 401ks and traditional IRAs. Today’s retirement savings landscape looks much, much different. These new options offer you many different ways to invest for your future.

Take, for instance, a real estate IRA.

A real estate IRA is much like any other IRA in that you save money on a tax preferred basis. However, instead of investing in stocks, bonds and mutual funds, you get to invest in real estate. So, what are the differences between buying a property for personal use and buying investment real estate? There are four main differences. These include:

  • Title – Real estate, just like other tangible property, has a title that is transferred to the purchaser when the sale transaction closes. When you purchase a real property for personal use, that title is held by the lienholder until the time the balance of the loan is paid. When purchasing real estate for your IRA, the title must be transferred to your IRA rather than to you personally. This means that the asset must actually be titled to the IRA. Improperly titled assets will not be considered eligible for IRA consideration.
  • Funding – Buying real estate for personal use requires you to secure personal funding in order to close the transaction. If you are buying real estate for investment purposes in your IRA, the funds to purchase the asset must come from your IRA. If the funds are not available in your IRA to make the purchase, you cannot add personal funds directly.
  • Expenses/Income – As with the purchase of investment real estate, any expenses associated with your IRA assets must be paid from your IRA. And any income you receive from your investment must then be deposited into your IRA. This is how your IRA grows in value. For example, if you use your IRA real estate asset as a rental property, the monthly rental payments would be deposited into your IRA fund.
  • Signatures – Last but not least, any documents that pertain to your IRA and any investments that you make must be signed by the trust company that is serving as the custodian of your IRA.

Investing in residential and commercial real estate has always been a lucrative investment option. As a matter of fact, many people have made significant amounts of money by investing in real estate. A real estate IRA gives you a great way to invest in real estate while maximizing your retirement savings potential, making it a great option for those who are looking to diversify their portfolios and boost their rate of growth.

As you can see, there are many benefits to converting your traditional or Roth IRA or company sponsored 401k to a real estate IRA. If you are interested in learning more about opening a real estate IRA or how a real estate IRA works, please contact us today. You can find information about real estate IRAs and much more here.