Buying Real Estate With Roth IRA Funds

Buying real estate with Roth IRA funds is fairly simple and a good idea for several reasons. With a roll over IRA buying real estate is also possible and can be a good way to diversify your portfolio. In both cases the first thing that you will need is a self-directed account and the right trustee.

Many of you may be accustomed to having someone else make your investments for you; a brokerage, your trustee or account custodian. While that is the simplest way to grow your retirement account (and maybe the safest, depending on your investment knowledge), there are only so many types of investments that can be made on your behalf, typically, stocks, mutual funds, certificates of deposit or bonds.

With a self directed account, you have more investment options. With certain trustees, you have even more options. There are only a few types of investments that are prohibited by law. Investing in life insurance is one. Buying real estate with Roth IRA or traditional IRA funds is allowed, but most brokerages do not offer their clients that option.

In a roll over IRA buying real estate is also allowed. You just have to follow the rules. The rules are the same regardless of what type of IRA, you have. Usually if you have a roll-over IRA, it means that your funds were originally in another type of account, a 401-K for example. Once you have transferred the funds from one account to another, the fact that it is a roll over account is irrelevant, when it comes to rules and regulations regarding investments.

The regulations that apply to buying real estate with Roth IRA or traditional self-directed retirement accounts are fairly simple and straight forward. You cannot buy houses or land for your own personal use. Neither you, nor your family members can live in a house that is deeded to your IRA. Real estate deals must be made for investment purposes only and can only be of benefit to your retirement account.

Any funds that are needed for repairs, upgrades, remodeling or general maintenance must come out of the IRA and any profits (rental or resell income) must go back into the account. You must avoid making any purchase that could be considered “self-dealing”. A knowledgeable (and honest) custodian can fill you in on the legal details and complete information about buying real estate with Roth IRA funds.

If you are just about to transfer funds into a roll over IRA buying real estate with the account will only be possible if you a)get a self-directed account and b)find a trustee or brokerage that offers you that option. The Equity Trust Company is a good choice for a self directed IRA custodian. Now remember that they can only do what you ask them to do and insure that your transactions are legal. They cannot help you find the right deals. That is up to you.

If you are not an experienced investor, you can still profit from buying real estate with Roth IRA funds, if you get the right help. There are a small number of experienced real estate investors that are willing to help people grow their retirement wealth. It’s always a good idea to ask for help.

Some Rules For Buying Real Estate With Roth IRA

If you are interested in buying real estate with Roth IRA funds, take some advice from an experienced investor. There are successful examples of a roll over IRA buying real estate and there are some failures. Learn from the mistakes of others and you can be one of the latest success stories.

Everyone makes mistakes, but when it comes to buying real estate with Roth IRA money, mistakes are costly. Let’s start with choosing the wrong custodian and go from there.

Here’s an unsuccessful example of a roll over IRA buying real estate. A man chose to take a roll-over from his traditional account and chose a custodian that offered self-investing. He deposited the funds into the account well within the 90 day time period to avoid IRS penalties.

Once he started reading the fine print, he realized that the custodian he had chosen took 45% of his earned interest on un-invested cash balances. He also learned that for each transaction, he would be charged fees ranging from $25-$150. He did a little research and found a different custodian that only charged a reasonable annual fee, while offering more investment options.

When buying real estate with Roth IRA money, you will almost always have an “un-invested cash balance” and you are likely to conduct numerous transactions per year. So, per-transaction fees can really add up.

The man truly believed that a roll over IRA buying real estate was the right choice for him, but he realized that he had chosen the wrong custodian. Instead of transferring the funds, he took another roll-over that year.

The IRS only allows one tax-free rollover per year. So, the total dollar amount of the fund had to be included in “other income” at tax time. The result was a devastating bill that almost bankrupted him.

This man, whose name I won’t mention, made two mistakes. First, he didn’t read the fine print or shop around BEFORE he signed up with the custodian. Second, he failed to read the IRS rules for roll-overs and was unaware that transfers were a better choice.

Breaking the self-dealing or indirect benefit rules is responsible for some of the failures, when it comes to a roll over IRA buying real estate.

Buying real estate with Roth IRA funds must be kept an “arms-length”. Your account cannot buy from you or for you. Those are some of the rules that you need to know before you begin.

Knowledge is everything when it comes to the success of a roll over IRA buying real estate.

A different man grew the value of his account from $20,000 to over a million in less than three years. He started out slowly by flipping vacant lots, making $1000 profit on each transaction.

Now, he holds the mortgages on several properties. He’s only one of the success stories.

Buying real estate with Roth IRA money can be highly profitable, as long as you get the information that you need, ahead of time.

Considering today’s economic environment, selecting IRA real estate turnkey solutions can be the best investment strategy for building your retirement wealth.

Visit my website now to learn more about investing your Roth IRA money in real estate. Using a turnkey solution can be the best investment strategy to accomplish your financial goals.