Self Directed Real Estate IRA?
Re-published with permission of Russell Gullo.
A self directed IRA (Individual Retirement Account) or real estate IRA gives you the freedom to invest in non-traditional assets, such as multifamily investment properties, single families, co-ops, condominiums, improved or unimproved land (leveraged or unleveraged), commercial property, and more.
Over time, real estate investments have afforded many people with the powerful combination of appreciation and income. The purchase of real estate through a self directed IRA is a popular investor choice for this and other reasons.
You may finance or leverage any property you purchase for your retirement plan. The property is the collateral for the loan. As the property is an asset of the retirement plan, repayment of the underlying debt must come from contributions to or income from the property or other assets in the retirement plan. This type of loan is referred to as a non-recourse loan because the IRA holder cannot extend credit to an IRA.
Your entire transaction must flow through the tax-free or tax-deferred retirement account. The escrow must be opened by the account, not in the name of the beneficial owner. Vesting is always in the name of the account. The funds in your IRA may be used as good faith deposits, down payments, or purchase money.
When purchased, these properties become assets of your retirement plan or account. In addition: You may not personally own property that you intend to purchase with plan funds and you must ensure that your intended purchase is not a prohibited transaction. Neither you your spouse, nor your family members (other than siblings) may have owned the property prior to its purchase by your plan. Neither you nor your family members (other than siblings) may live in or lease the property while it?s in your plan. Your business may not lease or be located in or on any part of the property while it?s in your plan. You may receive any property as a distribution from your plan as a retirement benefit.
Managing assets does not include property management conducted by the beneficial owner of an IRA or a company owned by more than 50% by the beneficial owner of real or personal property in the IRA. Management fees may be paid out of your retirement account. A 1099 will be issued by you representing the individual retirement account to you or any other designated asset manager for the year in which such invoices are paid. This includes all property rental or lease income, taxes, property management and repairs. Invoices are paid on client approval by the IRA.
Russell J. Gullo, CCIM, CMIA, CEA, is a certified multifamily investment advisor, certified exchange advisor, president of R. J. GULLO & CO., INC., which is a national ?qualified intermediary? for real estate exchanges, chief executive officer of the R. J. GULLO COMPANIES of Multifamily Investment Property Services, the founder of the AMERICAN INSTITUTE OF REAL ESTATE EXCHANGORS and the director of operations for the RUSSELL J. GULLO School Of Real Estate Investment Studies. Mr. Gullo, can be reached at (866) 754-8556 (R J GULLO)
When you are ready to buy or sell a home, please feel free to contact us. Call Cathy at 716-983-4234 or Melanie at 716-480-8409. The ERA Team VP Real Estate office is located at 12 Washington Street in Ellicottville, NY.
Source: http://www.teampritchard.com/2013/01/home-sweet-home/
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