Midland is usually asked the same questions about how people can use retirement funds for real estate IRA investing transactions.
The objective of self-direction is to invest in what you know best. If you have experience with rentals or rehabbing, for example, you may benefit from investing in these assets using retirement funds.
Realtors who understand investing with retirement funds can better assist existing clients—and cultivate an entirely new client base—by explaining how to use IRA funds to invest. Realtors can also put their own knowledge to work for them by using real estate IRAs to achieve their own retirement planning goals.
Knowing the process and rules of a real estate IRA is critical.
Below are answers to the top 10 real estate IRA questions Midland is asked:
- Yes, you can invest in real estate using your retirement plan. These plans are commonly called real estate IRAs.
- Yes, that means you can use that cash you have been saving for years in your retirement funds to purchase real estate.
- Yes, we know your broker/CPA/attorney has not said anything about this to you, they have probably never heard of a self-directed retirement plan. That is because mainstream retirement plan custodians limit you to what they sell, such as the traditional stock and bond.
- Yes, Midland allows clients to use alternative assets (like real estate) to build wealth. We are not your typical custodian. We do not sell investments. We allow you the Freedom to Invest™ in what you know best.
- Yes, it is legal. You can thank the IRS for that. Their website states: “IRA law does not prohibit investing in real estate but trustees are not required to offer real estate as an option.”
- Yes, all income and expenses related to the asset flow directly into and out of your retirement account.
- No, purchasing real estate in an IRA is not a taxable event. Investments are owned just like a stock or bond—as a tax-sheltered asset in your retirement fund.
- No, you cannot sell a property you own already to your retirement fund. You also cannot personally purchase or rent real estate your retirement fund owns. Neither can other disqualified persons who include you your lineal relatives (ascendants and descendants). You and these relatives are deemed disqualified persons and are prohibited from transacting with your IRA. However, the IRS has no problem with your real estate IRA renting/buying/selling to non-lineal relatives (brothers, sisters, aunts, uncles, cousins, etc.).
- No, there is no limit to how much profit you can make from real estate deals in your retirement fund. The IRS only limits how much money you can annually contribute (take out of your personal pocket and put in your retirement fund).
- Yes, self-directing a retirement plan easy to do. To get started, fill out our application online and get started using a real estate IRA today.
The goal of our clients is to diversify at least a part of their retirement portfolios out of stocks and bonds and into real estate. This kind of diversification using self-directed IRAs can help them protect their wealth in the event of a stock market dip.
If you have additional questions or want to take a more active role in securing a successful retirement future, contact Midland.
Editor’s note: This blog was originally published in December 2016 and has been updated for accuracy and comprehensiveness.