Most people seem to think that real estate as an investment vehicle is a pretty sound decision, and many people are starting to understand the many benefits of buying real estate with your IRA account can provide additional income for your IRA account, especially if you buy “fixer upper houses” or “handyman special deals“
Whether you’re making a direct purchase of property, leveraging current real estate you own, holding interest in an LLC (limited liability company), or any other real estate related IRA investment, investing in real estate has been historically a more reliable place to put your monty than the uncertainty and instability of the stock market. Because of this fact, the low-risk and high reward of real estate as an alternative for your IRA has steadily grown popular over the past number of years for those wishing to grow their retirement savings in comparison to investing in stocks and bonds.It just provides a bit more control as opposed to the stock market.
It is super important for you and anyone who plans on buying real estate with an IRA to understand the tax consequences, possible legal troubles, and various other possible problems when purchasing real estate with your IRA in Pueblo.
So, let’s dive into some tips on buying real estate with your IRA in Pueblo Co!
Tips on Buying Real Estate With Your IRA in Pueblo
If you dont have a self directed IRA account, the first thing that you want to do is find one to work with. Make sure its “self directed”. Self directed basically means that you tell the company what to buy and they take funds from your account and make the property purchase. If you need help finding one to work with go ahead and visit this link “the 6 best self directed IRA companies”
Open a Self-Directed IRA
The first step for purchasing investment properties in Pueblo within your IRA is to open a “self-directed” IRA. You can do this by visiting a qualified financial advisor or other trusted fiduciary to act as the IRA custodian. A fee-only financial advisor can help you set up this account with minimal hassle, while a commission-based financial advisor may attempt to steer you clear of purchasing tangible assets within your IRA (he or she won’t earn much on the investment).
Types of Properties You Can Buy With Your IRA and Rules.
You are able to purchase all sorts of properties within your self directed IRA once you get it set up. You can purchase residential, commercial, industrial, as well as any raw land. Many smart investors are choosing to purchase unique properties inside thier IRA such as-parking lots, storage units and other types of commercial real estate that dont really have any maintenance expenses but operate very steady cash flow.
Your self directed IRA account unfortunately cannot own a home that you live in or go on vacations to. You want to verify what you can and can not do, but it is to our knowledge that you cant even spend one night in the home. You cant even get around this restriction by “renting the house” to yourself, or having family or friends be on the lease with your IRA account. This would create a conflict. Of course you want to verify what I am telling you with a local real estate attorney and your accountant.
How Does Income Work With Real Estate In An IRA?
The money that you make from your investment into your IRA account may not be used to your own personal benefit. This means that any and all money the IRA account makes needs to be free from you having access to even $1 of it. This money stays in the IRA account until you retire. This also applies to your property taxes, insurance, improvements and other costs associated with maintenance of a property needs to all be paid by your IRA. This is why it is crucial to get with your CPA to determine the right course of action to avoid any penalties of a forfeit of the IRA and income taxes needing to be paid.
It’s important the all distribution rules associated with an IRA (or Roth IRA) including taxation, required minimum distributions, beneficiaries, and other factors do not change when using a self-directed IRA to purchase a property. There can be a huge upside to real estate in your IRA, but it’s best to know exactly what’s in store.