By J.P. Dahdah, Founder & CEO of Vantage
With a Self-Directed IRA, investing in real estate is easy. Here are two simple suggestions, which help keep the process fast and efficient.
1. Make a cash purchase. With a Self-Directed IRA, you can invest in lucrative real estate deals. Taking advantage of these market opportunities may be more effective if your IRA has the total amount of the sale price on hand. Real estate may be purchased in three ways with a Self-Directed IRA:
- With 100% Cash from the SDIRA.
- By partnering with other investors.
- With a non-recourse loan.
According to IRA regulations found in Internal Revenue Code 4975, you may not co-mingle your personal money with your IRA investments since you are considered a “related party” to your IRA. This means if you don’t have enough cash to cover the total amount of the property’s purchase price, using a sum of money from your Self-Directed IRA as a down payment won’t be allowed. Self-Directed IRAs are not meant to be funding sources for your personal investments. The assets purchased with IRA funds are held within your Self-Directed IRA and titled to your Self-Directed IRA, not you personally. You cannot try to qualify for a personal loan when using IRA funds to expand your wealth. So, when a Self-Directed IRA is being used to purchase a property with leverage, the IRA is the borrower, not the account holder. Any extension of credit by the account holder would be considered a prohibited transaction.
2. Understand provisions and guidelines. The IRA Custodian or Administrator of your Self-Directed IRA will be able to help you keep informed about prohibited transactions, provisions, and guidelines of SDIRA real estate investments. This is important to keep you properly educated and help you avoid IRA pitfalls and real estate scams. Having a complete understanding of your limitations will help ensure you continue to expand your investments and wealth without any worries or difficulties.
For more information on how you can discover your IRA investing alternatives, contact our team at (866) 459-4590 or Info@VantageIRAs.com.