Most savvy investors know the benefit they receive when investing in real
estate through a Real Estate IRA. However, very few of these investors
are aware that their self-directed IRA is capable of a partnership with
other investment funding sources that can drastically increase their return
rate. Hopefully, these tips will help make you become better informed.
Team Up with Fellow IRA Investors: The first way to utilize your IRA for real estate investment is to team
up with fellow IRA investors. Let’s say that you are an investor
who has $100K in a Real Estate IRA and you want to buy a property listed
at $250,000. By partnering with other investors, you could find another
self-directed IRA Real Estate investor who is willing to contribute $150,000
to the purchase of the property. There is no limitation on how many investors
you partner with, as long as you keep a consistent split on all of your
Example: If you contribute $100,000 to the $250,000 property, you own a 40% share.
The investor you partner with adds $150,000 and therefore owns 60% share.
Your IRA would collect 40% of all rental profits, and your investment
partner would receive 60% of all profits. Expenses would work the same
way. The percentage of ownership is indicative of both the benefits received
and costs incurred.
Partner with Family: If you do not want to search for an IRA investment partner, partnering
with family is another option for investment. There are limitations on
involving the family in the ownership of property already held under your
IRA, but these limits do not apply to acquiring new assets.
Partner with Yourself: This seems confusing, but the same exception to the disqualified person
rule that allows partnering with family also permits the investor to ‘partner
with himself.’ Self-directed IRAs very clearly benefit the investor
upon retirement and not beforehand. Because of this, self-partnership
may only be permitted if you hold enough personal funds to purchase the
said property without utilizing your self-directed IRA.
By using smart and creative tools, along with proper due-diligence and
legal guidance, your self-directed IRA can help you invest in more real
estate with an opportunity for even greater profits.
Additionally, many investors who prefer to make passive investments with
their self-directed IRAs including investments into blind mortgage pools,
or direct investing as a lender in whole or fractional deeds of trust
and mortgages. Unlike a traditional non IRA investment in which interest
income is subject to regular income treatment vs. capital gains, an IRA
may shield interest income from heavy taxation at time of realization.
Contact Geraci Law Firm at (949) 298-8050 today, or contact NemaDaghbandan directly for more information.