Posts Tagged ‘real estate ira’

Responsible Investing While the Economy is Booming

Wednesday, June 6th, 2018

Timing the market is usually a pretty bad idea. The market continues to hit new highs, which usually leads to even more money heading toward stocks. No one knows when the next bear market will start, nor do they know when it will hit its bottom. This means that it’s a pretty good idea to diversify across several different asset classes to minimize the pain that the inevitability of the next recession will bring to many. Here are some assets that are good ideas as the current bull market starts to get a bit long in the tooth.


Getting rid of all stocks is not a good idea, because the bull market could continue to run. Additionally, not all sectors will necessarily get hit during a bear market. Consumer staples, for example, tend to do better than other sectors in down markets. People still need to buy toilet paper and bleach. While it’s not a good idea to exit stocks altogether, it is probably a good idea to take some profits and look into other asset classes to mitigate the possibility of a crash.


Stashing all excess cash under a mattress or in a low-interest savings account is not really a good idea. Inflation will make this cash worthless in terms of buying power over time. This does not mean, however, that you should have no cash on hand. When the next recession hits, it’s likely that many people will lose their jobs. An emergency fund can provide a buffer between jobs. For those who do not lose their jobs, the cash could buy stocks at fire-sale prices. This cash can be held in a higher-interest savings account or a certificate of deposit to at least earn a little bit of interest in the interim.


Government bonds do not pay much in the way of interest at this point, but they are considered stable investments. Also, they pay out the interest that can provide a bit of income on a monthly basis. This interest can help offset some lost income that might be a consequence of the next recession.

Gold and Precious Metals

While gold might not be a productive asset like the stock of a company or a plot of farmland, it does tend to preserve capital in down markets. In fact, as people start to panic and sell off stocks at any price they can get, precious metals can actually appreciate. This has been the case in the last two major recessions. Those invested in gold did much better than those in stocks.

Real Estate

The value of real estate can fluctuate pretty extensively during an economic cycle. However, this does not mean that real estate is not worth holding as an investment. As long as real estate remains occupied, it can provide a nice cash flow. Sometimes this cash flow can return as much as 8 to 10 percent of the initial investment on an annualized basis.

As the market melts up, it is probably not a good idea to hold 100 percent of a portfolio in stocks. There are other asset classes that should provide a bit of cover when the inevitability of the next recession becomes a reality. The time for investors to prepare for this decline in stock prices is now. It’s possible to take some profits and diversify to preserve more capital over the long run.

Is Investing in Real Estate for your IRA?

Monday, May 14th, 2018

Real estate is definitely one of the more lucrative, and sought-after investment types. The reason it’s so sought-after is that the possibility of return on real estate investment is higher than other types. Plus it’s familiar, right? The question though is whether or not it’s right for you, and your IRA.

First thing’s first

You first need an IRA that’s held by the custodian and administrator of your choice. The custodian reports to the IRS on deposits, withdrawals, and year-end balances. Custodians hold your real estate IRA funds like a bank, so that your investments are IRS-compliant; because one of the easiest ways to get your IRA disqualified by the IRS is if it’s found to be in violation of IRS rules. So, to avoid that, choose a custodian wisely.

Speaking of rules, here are some more:

  • The IRA owner isn’t allowed to work on the investment themselves. Say you bought a fixer-upper through your IRA, it will need lots of work, right? You’re actually not allowed to do the work yourself, you will need to hire a contractor to take care of that for you.
  • All costs associated with the property must come from your IRA, and any income earned from that same property must also funnel back into your IRA.
  • You cannot live on the property that’s funded by your real estate IRA. It must be used as an investment property only.

Direct benefits and use

To expound upon what we mean by you’re only allowed to use your new property only as an investment property, and not for personal use, is simple. Since the property is legally owned by your IRA, it cannot be used as a vacation home for you or your family. Period. You also cannot use it as a rental home for your family. So no vacations, and no renting to your own family.

It may not be for you

There are a lot of technical and legal loopholes to jump through when you own real estate. It only gets more complicated when it’s an investment property. And even more so when it’s an investment property through your IRA. For those reasons, a seasoned real estate investor will catch on quickly, while a novice will have not only the real estate biz to study but also the real estate IRA world.

By no means is this suppose to discourage anyone from seeking real estate as an investment, you just have to know what you’re getting yourself into. It may be hard work at times, but the promise of rewards makes it worth it.

Q&A: Partnering Your IRA with Real Estate

Wednesday, March 14th, 2018

IRA with real estate - square

Why real estate? What are the benefits?

For one, you’re diversifying your retirement portfolio, and getting it out of the stock market where it’s tied to the ups and downs of the same market that we saw lose $2 trillion in 2008. Your IRA is also more secure since it’s backed by tangible real estate, where the returns can provide a stable source of income that goes directly back to your real estate IRA, where it will wait for you come retirement.

If I invest in a home with my real estate IRA, can I live in it?

Unfortunately, no. IRS rules prohibit certain people related to the IRA owner, including the IRA owner, from living on the premises. The rules are there to prevent what’s known as “self-dealing”, to minimize conflicts of interests, that could adversely affect your IRA.

Disqualified persons?

A disqualified person would be:

  • The real estate IRA owner
  • The real estate IRA owner’s spouse
  • Ancestors
  • Lineal descendants
  • Spouses of lineal descendants
  • Investment advisors
  • Fiduciaries
  • Any business entity (LLC, Corporation, Partnership, Trust) in which any of the disqualified persons previously mentioned has a 50% or greater interest

What are prohibited transactions?

Prohibited transactions include the following:

  • The selling or leasing of any property between a plan and a disqualified person
  • Lending money or another extension of credit between a plan and a disqualified person
  • Furnishing goods, services, or facilities between a plan and a disqualified person
  • Transferring or using by or for the benefit of, a disqualified person the income or assets of a plan
  • Dealing with income or assets of a plan by a disqualified person who is a fiduciary acting in their own interest or for their own account

Do I need an LLC to purchase the real estate?

No, you don’t need an LLC to purchase the real estate, so long as it’s possible for you to purchase the real estate directly through your self-directed IRA custodian. When done this way, all rent checks and expenses will be paid to and through the custodian. However, if you would like checkbook control over your IRA, meaning you will be the one to collect the rent and pay all the expenses, then you need to set up an IRA LLC.

What’s checkbook control?

Checkbook control is just as it sounds, it’s a checkbook that you control. It means that you have signing power over your IRA so that you no longer need to go through your custodian to get funds moved around. So if you need to call a plumber to get something fixed on your property, you can pay them then and there, and the cost will be debited from your IRA. It’s essentially cutting out the middleman, making your IRA more efficient.

The Rules of Buying Property with your Real Estate IRA

Monday, February 12th, 2018

Real estate is one of the most sought-after and lucrative hard asset types that investors love. It’s popular because it’s not just single-family homes, but commercial real estate, farmland, business parks, apartment complexes, and more.
What most Americans don’t know is that you’re allowed to invest in these types of real estate with your self-directed IRA, and any gains made off of your investments go back into your retirement account.
As with any investment, there are rules that you have to follow to make sure that your IRA is compliant with IRS laws, so let’s go over a few rules.

Your personal use

When real estate is purchased as an investment property, it almost seems like second nature to want to inhabit that property. But when your IRA has purchased the home, your IRA is the technical owner, not you, unfortunately. Neither you or your family are allowed to use the property for personal use, either as rental tenants, overnight guests, or anything in between.


This rule seems like it should be fairly self-explanatory, and seems easy to avoid, but if you’re found violating these rules, your IRA could be disqualified. Self-dealing is when the IRA owner uses their IRA for personal gain or promotes their own self-interest. Say if you’re looking for a single-family home to buy with your real estate IRA, and your own home is for sale, so you think about buying your home with your IRA. That’s self-dealing. Because you directly benefit from your IRA buying your home, it’s not allowed.

Limited Liability Company

A Limited Liability Company is better known as an LLC, and an LLC paired with your real estate IRA isn’t a rule, but a perk. By opening an LLC, you will then have checkbook control, a physical checkbook that allows you to pay fees, services, any costs affiliated with the property your IRA owns.

What Alternative Investment Asset Types are for you?

Monday, September 4th, 2017

When most people think of investing, they might think of the stock market. Some people may even think of stocks AND bonds. All in all, most think of something that’s inaccessible to them, and that only the professionals can dabble in.

Owning an alternative investment can be a way to diversify a portfolio because they are non-correlated assets to most other assets. These types of assets are also commonly invested using a self-directed IRA. Let’s go over a handful of our favorites.

Real estate

The range of types of real estate you can invest in is wide. Most will automatically think of either single family homes or commercial real estate, but it goes beyond that. To name a couple, raw land, apartment complexes, farmland, storefronts, storage units, and many, many more.

Private placements

Simply put, a private placement is an offering of a company’s securities that is not registered with the SEC (Securities and Exchange Commission), and is not offered publicly for purchase. Only a few select individuals are offered private placements, so they’re difficult to find in that regard.

Precious metals

The reason that gold, silver, platinum, and palladium are considered precious metals is because they’re rare. Their value is intrinsically tied to their rarity, and in turn, is tied to how they’re priced.  Investors hold precious metals as an alternative investment and to, ideally, hedge against inflation and financial turmoil.