A self-directed IRA is a retirement plan that lets its owner invest in assets other than stocks, bonds and mutual funds, unlike the more traditional retirement accounts like the 401(k) and the simple IRA. Assets which are most preferred by self-directed IRA investors include real estate and gold bullion.
The types of real estate investments in a self-directed IRA include unimproved land, multiple-occupant dwellings, foreclosed properties, mortgages, rental houses and office buildings. As is the case for most investments, it helps to have some experience with the market that you are planning to invest in. When you use your self-directed IRA for the purpose of investment in real estate, you are essentially lending money to yourself to pay for the real estate, and the income generated from the property go back to your account so the loan can be repaid.
Rates of loans when lending from a self-directed IRA can be a lot higher from the more conventional lending sources like banks and mortgage companies. Don’t be surprised if you see rates in the 12% to 18% region when borrowing from an IRA.
Just follow these simple steps to start investing in real estate using a self-directed IRA:
1. Start up a self-directed IRA account.
2. Transfer funds to your self-directed IRA account either by cash or from another IRA.
3. Make the investment, if you have not hired a custodian, to conduct transactions for you, in which case you will have to direct them to take this step.
After the opening of your self-directed IRA account, you can then transfer the agreed upon amount of money for the investment. The next step is merely a formality in which the two parties sign an agreement. Your IRA now holds the real estate.
It is important that you study up on IRS rules related to self-directed IRA because the last thing you want is fall in a hole as a result of some careless investments you yourself made.
Get more information on, 3 Reasons to Invest in Real Estate Using your Self-directed IRA, Click Here
How a self-directed IRA can make you money from real estate investments
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