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Real Estate IRA

You can use your IRA, 401K, 403B or any qualified retirement plan to purchase real estate or buy a business. Tap into this hidden resource and turbocharge your retirement plan.

A Little Personal History

In addition to real estate, we run an insurance and financial planning business. For years I have been carefully helping my clients plan their retirement with life insurance, annuities, long term care and mutual funds.

But anyone who helps individuals deal with the financial realities of retirement can tell you that the average Baby Boomer is woefully unprepared to stop working. I don't mean that they do not have a desire to play golf, fish and sip martinis. I mean that they cannot afford to. They have not saved enough money and unless you are one of the lucky few, they do not have pensions to supplement their social security. If they live too long they are going to bagging groceries and eating lunch at the senior center.

So, what do I tell a 55 year old couple who needs to save a million dollars in the next 10 years? Do I put them in a CD paying 4-5 percent? Perhaps gamble on a mutual fund that might, if we get lucky, return 7 or 8 percent? It just will not work.

That is, among other reasons, why we are in the investment real estate business.

Real estate is the only investment that will give you a fighting chance of being able to retire and stay retired, if you did not have the foresight to be saving for the last thirty years. The only way to accumulate a lot of money faster is to marry it.

Self Directed IRA

What does ‘self-directed’ mean?

The term ‘self-directed’ does not actually have any legal connotation. It does not imply a different type of IRA, or a separate set of IRS rules. ‘Self-directed’ is simply an accepted industry term indicating that the IRA custodian is allowing the IRA owner greater control over their investment decisions. When an IRA account is self-directed, the IRA owner makes all investment decisions and instructs the custodian to act.

Types of Property Your IRA Can Own

Single family and multi-unit homes, apartment buildings, co-ops, condominiums, commercial property, improved or unimproved land, whether it's leveraged or unleveraged, may be purchased by your Qualified Plan or your IRA.

Your IRA can invest in a LLC that in turn invests in real estate. The LLC can have other IRA or individual investors as well.

Can I Borrow Money and Use My IRA?

The short answer is yes, you can. But, there are certain guidelines you must adhere to.

First of all, a non-recourse loan is typically made for commercial property. There needs to be a cash flow and income that exceeds expenses by a certain margin. The lenders will treat the loan just as they treat a commercial non-recourse loan. For IRA's and 401K plans they generally lend with 60-70% LTV. If you have $150,000 in an IRA or 401K, you can control a half a million dollars worth of real estate. If the real estate went up a conservative 6% a year, you would have made close to $100,000 in three years. Taking it one step further, if the investment was from a Solo 401K (more on this later) you would not even have to pay tax at the time of the gain. That, my friend, is how you pump up retirement savings in a short time span.

Ensuring the Tax-Deferred Status of the Account

The entire transaction must flow through the tax-free or tax-deferred retirement account. The escrow must be opened by the account, and not in the name of the beneficial owner. Vesting is always in the name of the account. Only Qualified Plan or IRA funds may be used as good faith deposits, down payments, or purchase money.

If title is vested in individual account holder names, it may not be subsequently sold to the tax-deferred or tax-free account.

Additional Requirements

When purchased, these properties become assets of your Plan or account. In addition:

What Does All of This Mean?

Let me break it down for you.

You have some money in an IRA. Maybe you own some stock, mutual funds or perhaps a CD. The investment is not performing and you wish you could do something with it that will give you a better return. So, you liquidate the assets and move the money into the self-directed IRA.

Now you can use this money to buy property. You can buy land, a house, condo or commercial property.

Some Words of Caution

We are one of the few real estate firms that have expertise in using self-directed IRA's for real estate investments. You can get quite sophisticated with the purchases. You can even buy a business with your retirement accounts.

But, there are special rules on what you can buy and how you must purchase it. There are also special tax considerations when using outside financing. We work with a few specialty firms that specialize in self-directed IRAs. Together, we can guide you and keep you out of trouble with the IRS.

Why Haven't I Heard About This Before?

You stock broker or financial advisor will not be telling how to take money away out of their pockets and invest in real estate through your IRA or 401K plan. The financial magazines run large ads for brokerage firms and mutual funds. Again, they are not inclined to anger their advertisers.

Nevertheless, you can take your retirement plans to new heights or go into business for yourself with your qualified retirement money. I do it and so can you.

Solo 401K

What if I told you that if you are self employed you can set up your own 401K plan, put up to $98,000 a year into it and invest the money in real estate? Interested? Ok, let me up the ante. What if I told you that you could defer the taxes on any gain you made with this money? No current tax on the gain. Do you have any idea how that improves your profit and wealth building potential?

You are a real estate investor or at least hope to be one. Spend 5 minutes and read my article on Solo 401k plans. Click here for the Solo 401 article.

Martin Unger
Real Estate Investments

- Pre-Construction
- Spec Homes
- Condos
- New Homes
- Land
- Relocation

954 - 255-5056 (office)
954 - 461-0319 (cell)
775-254-2881 (fax)

(an associate of London Realty Corp)

9000 Sheridan Street
Suite 90
Pembroke Pines, FL 33024