HOW DOES THE REAL ESTATE PROCESS CHANGE WHEN USING AN IRA
The most popular self-directed investment is real estate. Real estate is a great way to not only build a real estate portfolio but also take advantage of profits being tax deferred in the self-directed IRA. No 1031 exchanges are EVER necessary. Here are answers to the most common questions from people who are using a self-directed IRA to purchase a real estate investment.
The biggest thing to remember is that it’s the IRA involved in the deal, not the account holder; therefore, the buyer or seller on the real estate contracts/documents should be titled in the name of the IRA: “American Estate and Trust FBO Account Holder’s Name”. FBO stands for “For the Benefit Of”.
As the IRA custodian, American Estate & Trust signs the real estate contracts and documents on behalf of the self-directed IRA. These documents can be submitted for signature via fax, email, snail mail, overnight service, however you choose. Once executed, simply provide instructions on how the docs should be returned.
Since it’s the self-directed IRA that owns the property, the IRA must pay for everything pertaining to the property. The IRA provides the earnest money or down payment, the IRA pays to purchase the property, the IRA pays for any inspections, repairs, property taxes, Property Management Company fees, etc. The self-directed IRA pays for everything! Some payments are very time sensitive, like earnest money or a deposit. When this is the case, a check can be overnighted from the self-directed IRA account or a copy can be faxed or emailed. It’s all up to you!
Not only does the self-directed IRA pay for everything, the IRA receives any money pertaining to the property, like rent and proceeds from the sale. This is a great way to build a retirement nest egg and potentially earn more money in a shorter amount of time than stock and bonds could possible offer.
There is a basic theme to keep in mind when a self-directed IRA is used to purchase an investment property – the IRA does everything! It executes docs, pays expenses, receives profits, etc. It’s just that simple!
If you have any additional questions, feel free to contact me directly (my contact information is below) or you can visit our website (www.Accuplan.net) and chat online with one of our knowledgeable IRA Specialist.
Jaclyn M. Grella