In a truly self directed IRA, real estate of practically any type and many other investment options are available. There are a number of steps involved in opening this type of account. Let's look at them for a sec!
First, you need to find an account custodian or trustee. This must be a qualified individual that either works for a brokerage, company or for himself. The custodian is responsible for maintaining the assets, making transactions and recording pertinent information.
In a truly self directed IRA, the custodian is “passive", meaning that he or she does not attempt to sell you anything or advise you about which investment to make. They may offer educational material and instruct you concerning prohibited investments, but they do not act as your advisor.
However, they will be responsible for filing reports with the IRS, preparing your statements and performing other administrative duties, as needed by the account. Self directed IRA real estate investments are held in the custodian's or company's name, along with a line that says for the benefit of your retirement account.
That's how everything is done legally to protect the account from taxes, creditors, garnishments, etc. In other words, you may be personally responsible for a debt and while your creditors could take possession of your assets in order to collect, they could not touch the assets held within a truly self directed IRA.
If you are interested in making self directed IRA real estate transactions, you must find a custodian that offers you that option. Not all of them do.
In a truly self directed IRA, you are allowed to make all kinds of investments. The account can be used to buy raw land, houses, apartment building and commercial property, as well as, franchises, liens, notes and even gold bullion.
There are a few things that, by law, cannot be held within the account. Those include life insurance, antiquities and collectibles. Your custodian will also be able to instruct you concerning prohibited investment types and transactions.
Self directed IRA real estate transactions that are prohibited have to do with “self-dealing" or “indirect benefits". Here are a couple of examples. You cannot instruct your custodian to use account funds to purchase the house that you live in or one that you plan to live in. If the account holds a vacation property, you cannot use it for your personal family vacations.
Conducting prohibited transactions within a truly self directed IRA will cause the tax-exempt status to come into question. You could expose yourself to numerous taxes by self dealing or reaping benefits from your investments, today. The accounts are designed to benefit and fund your future, not your “present".
Why make a self directed IRA real estate investment? If you buy a property using other funds and then sell it for a profit, those profits are subject to capital gains taxes. If own rental property, the rent you receive is subject to business income taxes. The tax savings alone for investors can amount to tens of thousands of dollars.
With a truly self directed IRA real estate is also a good way to diversify and secure your future. If you find the right deals, you can grow your account faster than you ever thought possible.
Joe Fazchas is a Real Estate investor as well as owner and founder of http://www.iLOCAdvantage.com - a company that partners with private individuals and lending corporations nationwide for the sole purpose of financing and/or rehabbing investment properties. All of which is done using a proven “turn-key" Real Estate system. . . The ILOC IRA.
The ILOC IRA was created in 2004 by national Real Estate speaker, author, and investor, Adam King. To learn more on how you can obtain among the highest rates of return on your IRA, 401(K), CD, or other source of private money, simply click and visit: http://www.iLOCAdvantage.com