Investing Retirement Funds in Real Estate

Sometimes people feel only the savvy investor really knows all the tips, tricks and loopholes to boost their retirement nest eggs, but there are a few little known, talked-about gems. When it comes to real estate Lapeer MI agents say many seniors are thinking outside the box.

While many of you probably have heard that you can use retirement funds to buy real estate, how many have heard of the IRA Real Estate Investment? The IRS lets you purchase real estate as an investment with your retirement funds and you can’t touch any proceeds from that purchase until your retirement age.

⦁ Basically, you purchase a home using your retirement funds.
⦁ The home cannot be titled to you but must be titled to the IRA.
⦁ The profits that accumulate from this investment must remain in the IRA
⦁ At your retirement age, say 65 years old, you are able to sell that investment property and use the proceeds for your retirement.

Just think of the value of that home as equity accumulates. But imagine this scenario: seniors can purchase a home for retirement, rent it out, deposit the rental income into your IRA each month, and take the house as a distribution when you retire; then it will be yours to live in.

Today, with moderate interest rates, and a large portfolio of homes on the market, retirees see successful outcomes. Even better, there’s no need to use current funds because you’re using the money from your current retirement account to purchase the investment property. Yes, there are some guidelines like who you can rent to and whom you can purchase the property from – excluding close relatives.

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Unfortunately, every IRA plan does not let you purchase real estate. Some plans are specific, and let you purchase or commercial properties, or parcels of land, but there are many plans that can be more restrictive. The bottom line is property ownership in this type of IRA account can help boost your nest egg, and its especially advantageous to someone with time and perseverance.

There Are Guidelines And Exclusions

To be able to use the withdrawal money to invest in real estate, the first step is to open an IRA, with a qualified escrow company that agrees to work with real estate investments. Only a small number of retirement fund custodians accept this type of investment. After opening the account, funds from the existing retirement account must be transferred to the account in the new custody company.

This type of IRA is different from the traditional plan, as it includes special instructions that allow the escrow company to make investments on behalf of the owner of the account. These accounts are generally called “Self-Directed”

After the property is in the IRA, the custodial company handles the tax and maintenance payments, which is an added advantage with a lot less stress. While IRA Real Estate investments may not be the right fit for every investor, it certainly offers you another vehicle to keep income coming in, even when you stop working.