Self Directed IRA Real Estate
Real estate’s massive appreciation has garnered a lot of attention. Purchasing real estate through a self-directed IRA is popular for this reason. Self-directed IRA real estate gives you the freedom to invest in alternative assets. Investors can utilize their retirement funds to buy single-family and multi-unit homes. In addition to traditional homes, investors can also purchase condominiums and apartments. These purchases can be on improved or unimproved land, or they can be commercial property.
Leveraged Purchases
If your IRA does not have enough cash to buy a property outright, you may be able to leverage any income it produces. Any income-producing property can be used as collateral for the loan.
Since the property belongs to the Self Directed IRA Real Estate, a debt must be repaid from assets within it. Repayment could be from the property, permissible contributions, or other IRA assets.
You can give no personal guarantee as the account holder, and there can be no personal recourse. Therefore, the loan obtained by your IRA is known as a non-recourse loan.
Beware that loans for property inside of IRAs may require an additional tax. The Unrelated Business Income Tax is the IRA holder’s responsibility to notify you. The IRA holder should have completed your 990-T tax forms at the initial account setup.
Added Considerations
You may not purchase a property that you or a spouse occupied. Also, you may not put a business inside the property while holding it in the IRA. Finally, if you disburse funds before turning 59.5, there is a 10% tax tacked onto them.
