Start a Self-Directed IRA for Real Estate Investing | Heaton Dainard ...

Start a Self-Directed IRA for Real Estate Investing

How has your retirement account been treating you?? Difficult economic times have spurred non-traditional methods to save for retirement, and many people are using a self-directed IRA to purchase non-traded assets like real estate.
A self-directed IRA is the lesser known of IRA options and requires account owners to make active investments on behalf of the plan.? Many investors shy away from the idea of opening a self-directed IRA.? While it?s not as simple as a traditional IRA, once you know the rules, it?s easier to navigate the system and be in a position to earn much higher returns.
To open one, an owner must hire a trustee or custodian to hold the IRA assets and be responsible for administering the account and filing required documents with the IRS.
Similar to other IRA accounts, owners can invest in stocks, bonds and mutual funds, but they can also invest in things that investment houses like Charles Schwabb, Fidelity and Vanguard don?t offer, like small businesses, boat slips, storage units, parking lots, land and homes.
Investors might initially be leery of investing in the real estate marketing but real estate can be an excellent long-term investment and historically generates higher returns than the stock market.
Investing in real-estate also provides a lot of options and can be incredibly rewarding, especially for investors that choose to buy in an area they know well.? A full service real estate firm like Heaton Dainard? can help an investor pinpoint a property that meets their exact needs.? As a co-founder of Heaton Dainard, I have completed over 650 real estate transactions in King County and know the neighborhoods and cities like the back of my hand.?? Certain properties I would advise clients to flip are usually not the same ones I would recommend to hold in an IRA. It?s important to communicate what your long-term goals are so I can find you the best property to build your wealth and meet those goals.
The process of using a self-directed IRA to jump into investing in real estate requires proper preparation.
Interested investors should seek legal advice, as well as input from an accountant and an experienced real estate agent that specializes in investments for a well-rounded picture. They should also be familiar with the rules for the type of IRA they?re using. Whether it is a Simple IRA, Roth or Traditional IRA, SEP or Solo 401(k), contribution limits still apply, and there are penalties for early withdrawals.? It?s important for an investor to know both of the benefits and drawbacks before making the decision to start a self-directed IRA.
Here are five things to keep in mind when considering investing in real estate through a self-directed IRA.

It takes time. I advise devising a timeline based on the account-opening process, transferring or rollover of assets and finding the actual investment.
It normally takes two to three weeks to open an account at a typical brokerage firm, and you?ll need to find a custodian who will hold real estate inside an IRA. The down payment must come from IRA funds, so rollovers may be required.
When a real estate investment is contracted, the IRA account holder reviews and signs the purchase agreement and then the custodian must approve it and release of funds to the title company. All of this takes time, so it?s prudent to learn as much as you can before jumping into a decision.

You cannot take advantage of IRA investments until you retire. You can?t use the fund to pay off your mortgage or live in or use the property you buy as an investment in the self-directed IRA.
You buy it because it is anticipated to appreciate in value over the long-term.? You also lose the depreciation tax deduction that you would otherwise receive on an investment property.
Your spouse, immediate families or companies you have a 50% interest in cannot be involved. While it is possible for the property to be held as tenants in common, an IRA is an individual account and you must avoid any conflicts of interest.
Self-dealing or enabling a transaction that is beneficial to you on the other end is strictly prohibited. You also cannot use the IRA as collateral for a loan; it should be treated like other retirement accounts.
It is more work a traditional IRA. While there are certainly outstanding benefits to opening a self-directed IRA, it?s important to note that there is additional reporting and administrative requirements involved in using a self-directed IRA to buy real estate. In order to get the most out of self-directed IRA, you must be aware of the rules and requirements.? For example, the investor should not be doing the work on the property, especially because he can?t get reimbursed.
All expenses, maintenance, taxes and insurance are paid from the IRA. If there are association dues or membership fees, those all must be withdrawn from the IRA. Finding tenants and contractors may take time, and every penny in and out must be approved by the custodian.?? By choosing to work with Heaton Dainard, we can recommend our trusted contractors that can work in your budget and time frame for improvements or get you connected with a reputable property management company that will deal with the day-in and day-out duties of a rental property.? A mistake many investors make is trying to do everything themselves and that?s not necessary.? There?s a huge advantage to working with a full-service real estate firm like Heaton Dainard that has a team of experts to help you acquire a discounted property, rehab it and assist with the exit strategy.
All income from the property is tax deferred. That includes rental income and capital gains!?? If you plan to be in a lower tax bracket at retirement, this is quite beneficial. You can also make tax deductible contributions to the IRA.
If you are interested in getting started,? please don?t hesitate to call Heaton Dainard at? Tel: 425.881.5131.? Heaton Dainard will offer free education seminars on Starting a Self-Directed IRA in the near future.? If you are interested, please email meredith@heatondainard.com to be place on the limited invite list. Want to be dialed in on great deals or view before and after slide shows? Like ?Heaton Dainard Real Estate Group? on Facebook.? For the month of August, we are donating $1 for every LIKE to the Habitat of Humanity East King County Chapter, an amazing non-profit that helps put disadvantaged families of our community into housing! Visit our website at www.heatondainard.com

Source: http://www.heatondainard.com/archives/979

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