By J.P. Dahdah, Founder & CEO of Vantage
One of the most significant advantages of a Self-Directed IRA is investing in less traditional options like real estate. How can you be sure if investing in real estate with your Self-Directed IRA is suitable for you and your retirement goals?
Here are the answers to some frequently asked questions regarding a Self-Directed IRA real estate investment:
- How is buying real estate with a traditional loan different from investing in real estate with a Self-Directed IRA? Many IRA holders mistakenly think that investing in real estate will be similar to buying a home. It is not. There will be differences in the title, the funding, the expenses and income, and the signatures and documentation required. Because this is an investment property and not a primary residence, it will be different.
- How much money does it take? The answer to this question is difficult to determine because every property and investment is different.
- Can I invest my Self-Directed IRA in property that I already own? At first glance, this seems like a great idea, but the IRS prohibits it. You cannot use your IRA to pay off a property you already own. It has to be a separate, arms-length transaction.
- Do I need to know a lot about real estate to invest in it? With a Self-Directed IRA, investors typically have a fair amount of background knowledge about real estate, but it is not required. You need to make sure you know enough so that you feel comfortable with your investment.
- Do I have someone I trust to work as my “custodian/administrator” to ensure I follow all of the IRS rules and regulations? A Self-Directed IRA is excellent because they give you a lot of control over your investment choices, but they are also more legally complex. You must have a custodian (these individuals are also sometimes called trustees) to make sure you are following all rules and regulations.
For more information on how you can discover your IRA investing alternatives, contact our team at (866) 459-4590 or Info@VantageIRAs.com.