Control Retirement Future USING YOUR 401K OR IRA TO BUY REAL ESTATE

Real Estate Agent with Decorus Realty DRE# 3207607

Like most Americans your retirement savings have been tied to Wall Street your entire adult life.  For better or for worse, your ability to grow your retirement savings is directly tied the massive machine called the stock market.  For some there is a comfort in staying with the pack, for others the lack of control can be maddening.  When a desire to jump past the herd and take control of your retirement future becomes strong enough you start looking for alternatives. You ask yourself is there a better way?  For millions of Americans that search for a better way leads them to a Self-Directed IRA. 

To the surprise of some, in the eyes of the law all IRAs are Self-Directed.  Every IRA in America has the legal capacity to invest in and outside of Wall Street.  The only differences from IRA to IRA are the restrictions placed by the Trustee.  Most IRA Trustees are Banks, stock brokers, or otherwise tightly tied to the securities market and they know how to make money on accounts invested there.  So when someone refers to a Self-Directed IRA they are referring to an account in which the Trustee does not require all investments be made in the stock market.

Not all Self-Directed IRAs are the same however.  Each Trustee has the right to set policies as to which investments are acceptable within their accounts.  For the most part those policies are set on the basis of the Trustee’s ability to profit from the investment.  Investments that create a higher level of labor or documentation will be limited to Trustees with the size and infrastructure to handle these services and to charge larger fees accordingly.  Costs can be a genuine concern for account holders considering a Self-Directed IRA.

So once you have your Self Directed IRA open, what are the legally available investments?  An easier question to answer is “what investments are not available?”  The reason is that the law does not lay out the acceptable investments, only those that are prohibited.  For example the law that authorizes IRAs does not state that you can invest in the stock market.  Rather, because stock market investing is not prohibited it is therefore allowed.  The same is true for the “Big Six Self-Directed IRA Investments” we will explore below. 

But first, what you cannot invest your Self-Directed IRA into:

  • No investment that is deemed a collectible.  So no comic books, stamps, wine or even coins unless the metal is precious and meeting a very high purity standard.
  • No life insurance contracts of any sort are permitted, but the most common type of life insurance investment is known as a viaticals investment and that particular investment arrangement is amongst the prohibited life insurance investments.
  • No investment that transacts value with the IRA holder, the holder’s spouse, lineal ascendants, lineal descendants or the spouses of lineal descendants.  Such parties are known as “disqualified parties.”
  • No investment that violates the holder’s fiduciary responsibility to ensure that all investment decisions are made with the growth and protection of the IRA as the sole motivating factors.  The law requires you avoid conflicts of interests with the IRA’s best benefit.

      So that is what you cannot do with your Self-Directed IRA.  Everything else is permitted.  Everything is a broad topic and as such we will look at the 6 most popular investments for Self-Directed IRA accounts.  There are millions of IRAs already taking advantage of these investments.

·         Number one with a bullet is real estate.  Typically residential rental real estate, but many investors will buy land to hold or commercial properties for rental.  With an IRA/LLC you will make an offer on the property in the name of the LLC your IRA owns, close in the name of the LLC, fund all transaction components with the LLC and receive all generated income back into the LLC.  Nearly all of our clients have prior experience purchasing property in their life.  For most people that property is the best investment they have ever made.  For nearly everyone it is a familiar investment. 

·         Loans are an incredibly popular investment category for Self-Directed IRA holders.  By comparison to some of the other investments that are made with Self-Directed IRA, loans can be amongst the lowest labor.  For many investors the idea of passive income can be very attractive.  These loans can come in the form of long term loans like first or second mortgages, or shorter term loans to individuals or businesses.  Loans can be secured or unsecured and the only obligation that the IRA holder has is to ensure that the IRA is getting a fair rate for its risk.  Unsecured loans are generally at higher rates than secured loans.

·       Click for all  6 Most Popular IRA Investments 

Self-Directed investors come from a wide variety of backgrounds but all share a common trait: the desire to have greater control and fewer restrictions over their investments than are permitted by typical IRA trustees.  The model Self-Directed IRA for maximum control and fewest restrictions is the IRA/LLC.  

For more information about real estate investing or to attend our IRA investing workshop send us an email at: 

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The Condo Shop | Decorus Realty

16850 Collins Avenue, Suite 105

Sunny Isles Beach, FL 33160

T: 786.704.8482 |