Self-Directed IRA Facts

A self directed IRA or 401k is not that much different from a traditional IRA or 401k in terms of growing your retirement savings other than a self directed IRA allows you to invest in a wider variety of instruments such as real estate. With a self directed IRA, you are also able to invest in real estate tax free.

Self Directed IRA Real Estate Rules

Once you've converted your IRA or 401k to a Self-Directed IRA, there are certain IRA real estate investments the government allows you to invest in... one of those is residential real estate - which includes apartments, single family homes and duplexes. Most people don't realize they can invest in real estate through their retirement plans because financial planners primarily focus on stocks and cd's.


So if you've ever thought about owning IRA real estate investment properties, doing so through your retirement account is perfect, especially if you don't have time to manage or take care of the property. It's not hard to invest in rental properties, however there are a few things you are prohibited from doing. The following are Self-Directed IRA Rules:

  • §  All investments must be arms length, meaning the buyer and seller are acting in their own self-interest and there is no influence from other parties.
  • §  You cannot sell or buy property from a disqualified individual. Disqualified individuals include you, your spouse, your parents, your kids and/or their spouses, grandchildren, grandparents, investment advisors, fiduciaries and entities where the disqualified individual owns 50% or more interest.
  • §  You cannot receive immediate benefit from a property owned by your IRA. No vacation homes, personal residences or office spaces because these would benefit you in some way.
  • §  You cannot lend yourself money to perform rehab work or cosmetic work on the home purchased by your IRA. You can't perform any maintenance on the home or even furnish the home. It's all done via a property management company, which is nice because then you don't have to deal with tenants. All income or rental profits generated from your investment must go back to your self-directed IRA and all expenses like improvements, property taxes and bills directly related to the investment property must be paid from your IRA account.


For more info on self-directed IRA's click here


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