Real Estate in 401K's or IRA'sare a little known secret that can help you to reach your financial goals faster and with little effort. Most people are very familar with the standard IRA's or 401K's and believe that their only options are the stock market, mutual funds,and CD's. As a REALTOR selling homes and investment properties in St. Augustine, Florida take it from someone whose husband decided to try another route and direct his 401K into a self-directed real estate IRA that it is a great way to build your IRA or 401K faster. I had heard about Self-Directed Real Estate IRA's when I sold real estate in Ohio and thought it seemed to good be true. When we moved to St. Augustine, Fl and I got my broker's license in Florida we decided it was time to give it a try. He rolled his 401K from the investment firm he had it in to a Self Directed Real Estate IRA andwe went looking for the perfect home in St. Augustine for him to purchase. We found it, he bought it through the trust, renovated it, and sold it. All of the profits went directly back into his Real Estate IRA trust without a cap on the profits and having to pay taxes on it right away. It worked just the way the company that we used to manage the IRA said it would. I wanted to make sure that there were no hidden surprises. It is set up as a trust and the company manages the details. The charges to manage it have been very reasonable.
Self Directed IRA investments earn tax-defered/tax free profits. When the real estate market crashed he did not lose any of his money because he was not in stocks, or bonds. Additional advantages of a Real Estate IRA include: A reduction of taxable income, estate planning, compound interest, and protecting your assets. There are 3 ways to purchase a real estate through an IRA you can pay cash, partner with a friend, family or business associate. With cash you have to have the money to cover all the regular costs at closing. All expenses like home improvements, repairs, utilities etc. are paid directly out of your IRA and all income from rents, or a sale are returned to your IRA. Types of IRA Real Estate Investments Can You Buy? Single Family Homes, Commercial Property, Apartments, Land, Duplexes, Condos, Mobile Homes For Rent or Resale,Tax Lein certificates, Real Estate Notes, Second Mortgages, Real Estate Options, Townhomes, and partial notes.
The IRS has very specific rules that need to be followed to keep the tax advantages in place. That information will be in my next blog.
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