Investing in Real Estate
Using A Self Directed IRA
All real property is either purchased or sold for your benefit using your Qualified Plan and/or IRA funds.
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.
A real property purchase or sale is initiated by executing either a Buy or Sell Direction Letter For Real Estate. Specific Instructions for completion of these direction letters are contained with the forms packet supplied to each account holder. Real property may be bought at auction for your Plan through a unique auction purchase program. Such purchases cannot be made with personal funds and later be reimbursed.
You may finance or leverage any property you purchase for your Plan. The property is the collateral for the loan. As the property is an asset of the Plan, repayment of the underlying debt must come from contributions to or income from the property or other assets in the Plan.
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.
While fractional interests in real property may be purchased or sold, such interests may not be bought from the beneficial owner of the Plan or IRA or members of their family or business, except siblings.
When purchased, these properties become assets of your Plan or account. In addition:
You may receive a fee for managing the assets in your IRA. Managing Assets does not include property management conducted by the beneficial owner of an IRA or a company owned more than 50% by the beneficial owner of real or personal property in the IRA. Managing Assets means managing your IRA portfolio. Management fees can be paid to you or other persons or entities you designate on receipt of invoices. A 1099 will be issued to you or other designated asset manager for the year in which such invoices are paid. All of the income and expenses are for the benefit of the account. This includes all property rental or lease income, taxes, property management and repairs. Invoices for expenses are paid on client approval. The record-keeping and administration expenses may be paid either directly from separate funds or through the Plan, and may be tax deductible.
When title and or escrow companies are involved, proper instructions will be provided to them for all documents for your account. In the event that a local title or escrow company has additional requirements other than those provided in our comprehensive package, delays and additional costs may result. For ease of completion, in many cases facsimile (FAX) transmission of information is acceptable, followed by hard copy originals.
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