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Investing with your IRA

September 18, 2018

Rehab Investing with Your IRA

If you’re not already planning for your retirement, you might find yourself out in the cold when those golden years finally roll around. However, even if you have an IRA set up already and you are socking away funds for the future, Real estate can help it grow even faster. In fact, you can start fixing and flipping with your IRA. Sound like a good way to build your nest egg and get into real estate investing? However, there are some complications that you’ll need to understand. Self-Directed IRA First and most importantly, you need to set up a self-directed IRA and then find an administrator that’s willing to let you start rehab investing with those funds. Not all administrators are willing, and not all those who are willing should be trusted. There are admins out there that exist for no other purpose than to push their own real estate sales, and you must avoid them. Find a trustworthy administrator that has no personal stake in your real estate investments. As a note, you can create either a standard or Roth IRA for rehab investing. Here’s a link to a company that some of my best clients use: https://www.trustetc.com/info/equity-trust-company?cmpId=701C0000000aEzk&ls=ppc&gclid=CjkKEQjwxN6dBRDavZLpufuu9L8BEiQA4Vx1b7xgKCRcHMyalSfYCwB6dV33D77-qNS-l39u9lKn3yjw_wcB You Don’t Own the Real Estate It’s important to understand that rehab investing with your IRA means that the IRA actually owns the property, not you. However, because it’s a self-directed IRA you do get to choose how that property is disposed including selling it. Funds earned from the sale will go back into the IRA allowing you to buy more property. It’s easier for most inactive investors to act as private investors. This simply means providing funds to companies who are established that can use your IRA funds to buy, fix and flip properties. This is a great way for your IRA to receive high returns. Most traditional investments wouldn’t produce these untypical results. This is how I fund most of my fix and flip investments. Considerations When Loans Are Involved IRAs can partner with banks and other sources of funding for rehab investing when there isn’t enough money in the account to purchase the property. However, it’s important to understand that while this is possible, and the funds from the IRA used remain untaxable, the money from the loan is not tax exempt, which increases your costs. Of course, the profit from flipping the property could be more than enough to offset those costs. There are several stipulations that you’ll have to follow. One of those is that you cannot purchase property that you or a family member will live in. Even renting a home to a family member is a violation of these regulations. Rehab investing with an IRA is possible, although some find it complicated. However, it remains an excellent way to grow your wealth over the long term.