Real estate assets encompass many diverse holdings. One popular way investors build wealth is through rental property investments. Rental assets have the potential to produce reliable monthly personal income for some investors. Other individuals earn retirement income from rentals purchased in their IRAs.
Self-directed IRAs provide account owners the unique ability of the Freedom to Invest™ in assets they personally know and understand. Account owners choose investments for their self-directed plans, drawing on their own expertise. If you’re familiar with rental property, using your IRA to invest can help you grow funds needed to retire.
Bear in mind your IRA owns investments purchased with funds from that account. Rental property investments produce monthly rental payments that are deposited directly into the IRA. If you decide to sell the property your IRA acquires that income, as well. This income accrues on a tax-sheltered basis in the account to build wealth for retirement.
Types of rental property assets permissible in a self-directed IRA
- Single and multi-family homes (houses, duplexes, townhomes)
- Commercial rentals (business space, restaurants, strip malls)
- Vacation rentals (in the U.S. and abroad)
These types of real estate investments present a great way to add diversity to your portfolio. And as we all know, diversity is critical to the success of our retirement planning endeavors.
Rules for rental property in an IRA include:
- The IRA pays all expenses related to the investment.
- Rental income flows directly into your IRA to maintain a tax-sheltered status.
- IRA owners may not perform repairs or maintenance of the property yourself. You must hire a third party to do this.
- You, certain family members, and others are unable to enjoy personal benefits of property owned by the IRA. An example is vacationing in your IRA-owned rental. The IRS publication Retirement Plan Investment FAQs outlines these and other prohibited transactions in detail.
How do you purchase rental property investments with retirement funds?
- Open a self-directed retirement plan with Midland Trust.
- Transfer or roll over funds from an existing retirement account to fund the new account.
- Identify viable investments after performing proper due-diligence.
- Direct Midland complete the purchase process on behalf of your IRA.
Midland works with you at your direction to assist in the purchase of investments for your IRA. We help ensure the administrative elements of your account comply with IRS regulations. We file reports on your behalf and help you avoid prohibited transactions. Midland has decades of experience in our industry, serving clients with over $2 billion in self-directed holdings.
Contact Midland and learn more or to get started investing with your retirement funds today.