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(DISCLAIMER: We are not financial advisors and this guide is not meant to act as financial, tax, or legal advice. It was written for informational purposes only. Make sure to consult a professional advisor before making any financial choices or decisions).


Self-Directed IRA for Real Estate

Have you heard about the Self-Directed IRA? It has been around for some time and many people have realized that their IRAs aren’t earning them much return. Sometimes, they were even losing money. Under those circumstances, people (and this may be you) have started looking for other ways to earn better returns on your IRA.


What is a Self-Directed IRA?


A self-directed IRA is simple. It’s a retirement account that has the same tax benefits as a normal IRA, but you have more flexibility in deciding where you want your IRA to be invested in.


Some examples of those allowed investments are:

  • Real estate (commercial, income-generating rental property, rehabs, etc.)

  • Promissory Notes secured by mortgages (i.e.: private lending)

  • Tax lien certificates

  • Limited partnerships

  • LLC’s

  • Sub-C corporations

  • Real estate options

  • Some types of precious metals

  • Stocks, bonds, and mutual funds, the more traditional investments you may already know of.

From the above options, you can see that you can buy investment Real Estate with your IRA, or be a private lender in Real Estate deal.


Are There Restrictions?

Yes, there definitely are. There are restrictions on what you do with the real estate if you buy and hold, what types of precious metals may be purchased, and often times the “custodian” of the SDIRA has restrictions on what they think you can and should invest in.


A custodian? What's that?


Self-Directed IRA Custodians


The US Government created the SD-IRA loophole to help investors take more control over their money while at the same time still getting tax benefits. But, the government does not want people setting up SD-IRAs and doing whatever they want with the money.


So the barrier that they have in place is the custodian.


The custodian is usually the Self-Directed IRA company whom you have your IRA with. They act as the “go-between” when you decide on an investment. Many custodians have guidelines on what you can invest in, how long it will take for you to actually make your money work for you once they approve such investment and a few other rules. There are more passive custodians who will let you have a checkbook to write checks from your SD-IRA directly to your investments.


You should do due diligence to find the custodian that is right for you. Also, there are fees involved and you should research prior to committing. 


Key Questions to ask a Self-Directed IRA Company Before You Work With Them

  1. What are your fees? 
    - Fees can vary wildly. Some charge an annual fee based on the value of the account, some charge an annual fee, some charge large setup fees, etc. Find out what works for you. But, the idea is that by being able to invest in Real Estate with your IRA and make higher returns, it allows you to make up for such fees.

  2. What’s the process for approval of an investment? 
    - Some companies can take up to 30 days+ to fund an investment after you send it in for approval. Some SD-IRA’s give you what’s called “true checkbook control”, where you get a checkbook to write checks from your IRA account. This option gives you immediate access to the funds in case you need it to close a deal quickly. Checkbook control usually cost a little more to set up than an IRA account. But it's a faster solution. Remember to find out what’s best for you.

  3. I want to invest in real estate and make private loans. Are there any restrictions on what I can invest in? 
    – Some SD-IRAs with larger, more traditional companies put restrictions on what your account can invest in. Some may not allow you to invest in Real Estate while others will. Just ask.

  4. Is my retirement account eligible to roll over into a SD-IRA? 
    – Not all retirement accounts can be rolled over into a self-directed IRA. Most IRAs can be. Some 401(k)s can be as well. Just ask your financial advisor and ask the representative at the SD-IRA company you’re working with.

  5. How long will it take for my account to be up and running and have funds available for investment? 
    – If you know you want to use your IRA to invest in Real Estate, start right away on getting it rolled over into an SD-IRA account. Some companies may take weeks or even a month to have your account setup complete and ready to invest. So, don’t wait until you find a great Real Estate deal to set it up. Start today so your funds are ready to invest when you need them.


Getting Your Money Working For You:

If you feel a self-directed IRA is a great way for you to invest in your retirement, then dive in, take some time to educate yourself, and do your due diligence on the pros and cons of an SD-IRA. 


If you have any questions on how you can work with us using your self-directed IRA, please fill out the form below, call or email us. As a qualified investor, you may want to purchase property to keep as rentals or explore private lending opportunities.

We look forward to working with you!

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