Investing In Real Estate With Your IRA




A Self-Directed IRA gives you, as an individual, complete control over selecting and directing your individual retirement account investments. You make all decisions regarding your investments. With a Self-Directed IRA you are not limited to the typical investment offerings of an IRA custodian or trustee, such as stocks, bonds, mutual funds, certificates of deposit and savings. In a self-directed account, you can invest in what you know and understand best.

A self-directed IRA  allows you to invest in alternative assets (approved by the IRS), such as real estate, notes, private placements, and much more. Many types of IRA accounts (Traditional IRA, Roth IRA, Individual 401(k), SEP IRA or SIMPLE IRA) can be self-directed. A “self-directed” IRA is an industry term, not an IRS term. The provider of custodial/administrator services for IRAs are allowed by the IRS to choose the assets that they want to service. Most of these providers only allow you to invest in stocks, bonds and mutual funds.

Are there restrictions?

Yes. There are restrictions on what you do with the real estate if you buy and hold and often times the “custodian” of the SD-IRA has restrictions on what they think you can and should invest in. The only investments not permitted in a Self-Directed IRA are life insurance and collectibles

As your investments earn profits, those earnings are placed directly into your Self-Directed IRA, tax-deferred; saving you money in taxes each year. In short, a Self-Directed IRA gives you the opportunity to control your investments.

Self-Directed IRA Custodians

The US Government created the SD-IRA loophole to help investors take more control over their investments while at the same time still getting the tax benefits. But, at the same time, they don’t want people setting up these SD-IRAs and just doing whatever they want.

The custodian is usually the Self-Directed IRA company who you have your IRA with. They act as the “go between” when you’re going to make an investment.  Many custodians have guidelines on what you can invest in, how long it will take for you to actually make your money work for you once they approve the investment. Some custodians are more passive and let you actually have a checkbook where you can write checks from your SD-IRA to make investments.

You should do your due diligence and find the custodian that is right for you.  Here’s a few recommendations:

Do some research to find the right fit for you.

What to ask a SD-IRA company?

  1. What are your fees?  Fees can vary wildly. Some charge an annual fee based on the value of the account, some charge an annual fee, some charge large setup fees, etc. Find out what works for you. But, the idea is that by being able to invest in real estate with your IRA… you’ll more than make up for the fees you’re paying with your higher returns.
  2. What’s the process for approving an investment?   Some companies can take up to 30 days+ to fund an investment after you send it in for approval. Some SD-IRA’s give you what’s called “true checkbook control”, where you actually get a checkbook where you can write checks from your IRA account… which gives you immediate access to the funds (i.e. – to close a deal quickly). Checkbook control usually is a tad more expensive to set up than an IRA account that requires all investments to go through the sometimes lengthy custodian approval process.
  3. Are there any restrictions on what I can invest in? Some SD-IRAs with larger more traditional companies like Schwab and SmithBarney put restrictions on what your account can invest in.  Some don’t allow real estate… while others do.  Just ask.
  4. Is my retirement account eligible to “roll over” into a SD-IRA?  Not all retirement accounts can be rolled over into a self-directed IRA.  Most IRAs can be… and even some 401(k)s can be. Just ask your financial advisor and ask the representative at the SD-IRA company you’re working with.
  5. How long will it take for my account to be up and running and have funds available for investment? Some people wait way too long to get this process rolling. If you know you want to use your IRA to invest in real estate… get the ball rolling on getting it rolled over into a SD-IRA account asap.  Some companies may take weeks or even over a month to have your account setup complete and ready to invest.  So, don’t wait until you’ve found a great real estate deal to get started… get started today so your funds are ready to invest when you need them.

Getting Off The Sidelines And Getting Your Money Working For You

If you feel a self-directed IRA may be a great way for you to invest a portion of your retirement in things you know (rather than the unpredictable stock market), then dive in, take some time to educate yourself on the pros and cons of a SD-IRA (those websites I put above are a great place to start. They have all kinds of resources to learn more about self-directed IRAs and how you can use them to invest in real estate).

If you have any questions on how you can work with us as an investor, just fill out the form bellow or give us a call at 267-639-3278.

Investor initial contact sheet

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