Hello all: I hope you're well. I wanted to share with you this morning a very cool way to buy an investment property. You can use your self-directed IRA to do this!
How does this work? Let's say you have an IRA that you'd like to have work for you. You can set up a self-directed IRA (Be careful here. This is typically done through an attorney or someone who knows how to set one of these up. Otherwise, there could be tax consequences for you.) and borrow against it for your down payment to buy an investment property. Again, note this is for investment properties only. It is not eligible for primary or secondary residences. This is a major red flag with the IRS.
So how does this work? You are essentially loaning the money to yourself (in other words it needs to be paid back) to purchase your investment. Obviously, you need to qualify based on this new debt plus anything else you might have. But let's say you've eyed an investment property that cash flows and the time to move is now. Yet you may not have the requisite 20%+ down you will probably need to do so. You could loan yourself the money from your self-directed IRA to make it happen.
If your IRA isn't necessarily performing the way you'd like it might be another reason to diversify by purchasing an investment property. Is there a downside? Of course. You are borrowing against your retirement and that can always be risky. But understand as long as you return the money in full to your IRA there is no penalty. My advice to you? Consult a financial advisor and possibly an attorney and CPA to run this by them.
In sum, investors are using their self-directed IRA's to snap up some great deals these days. Let me know if you need more information about this great program. Have a great day!
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