Because of the fiasco caused by the Madoff case – including some unpublicized cases – many retirement account owners have shifted to self directed IRAs. This is considered as a safe investment strategy because it gives owner total control over the administration of the account. It should, however, be noted that the majority of investment advisors and brokers have produced good, if not exceptional results for their advisees. These fund advisors, brokers and administrators, being in the industry of investments, make it their business to be always kept abreast of profitable ventures. This dilemma is what faces owners of self directed IRA accounts because the accounts require a great deal of research and leg work.
Lately, however, in real estate IRA, self directed retirement accounts owners have found in its investment very promising prospects because of its non-traditional nature and flexibility. Real estate IRA investing allows the account owner to purchase for the account a wider variety of instruments such as tax liens, mortgages, personal loans, raw land, foreclosures, homes and rental properties. This is opposed to the traditional retirement fund investments in the traditional retirement accounts that are limited to stocks and bonds as well as the money market.
Also in real estate IRA, self directed retirement account owners are able to realize profits inside the fund with the benefit of untaxed income. For instance, an account owner purchases a foreclosed property with the account’s cash at a rock bottom prices. This is the time to do it because banks, at this point in time, are anxious to liquidate their foreclosed properties. After the sale has been consummated and the property, say a commercial building, is transferred into the account, the account owner can commence leasing out the commercial spaces. All of the rental income collected from the lease agreements go back into the account. Similarly, all expenses related to the maintenance as well as other incidental expenses are taken from the account. All of these transactions, while reported to the IRS, are untaxed simply because they are done in the retirement account.
Evidently, when investing in real estate IRA, self directed retirement accounts have the advantage of security of investments. Comparing it with stocks, bonds and the money market, real property is a tangible proof of your investment and has always established its capability to appreciate in value over time. However, real estate IRA investing is for long term because although price appreciation is almost always assured, such does not happen overnight. In contrast, the traditional retirement fund investments can double its value over a span of days and just as quickly fall. Real estate IRA is obviously the choice for retirement funds that have a many years to go before withdrawals are made.
When investing in real estate IRA, self directed retirement account holders need to remember to abide by the rules and regulations set forth by the IRS or they lose their tax benefit. The most important thing is that real property investments could not be used for personal consumption by the account owner or his immediate family, ascendants or descendants. The acquisition of real property in IRA is therefore for the sole purpose of generating income for the account. Violating these rules will make you liable for regular tax rates which can set your retirement back considerably.
For more information about Real Estate IRA Self Directed and other important business topics and for legal consultation, please visit our Real Estate IRA Self Directed website at http://assetexchangestrategies.com or call us at 866.683.5228
