Since 1974 a self directed IRA could be used to invest in real estate. Some people are under the misconception that they cannot use their self directed IRA to invest in real estate. An investment in real estate using a self directed IRA is a good way to increase return on investment, especially in a volatile stock market.
Using your self directed IRA is not the same as taking a loan from the IRA account. Banks are not allowed to give loans from an IRA.
An IRA account also cannot be used to invest in collectibles such as:
- Artwork: So you will not be able to purchase a Picasso or Rembrandt
- Rugs: You will not be allowed to invest in the Persian rug from your vacation to NY or any where else
- Antiques: The Ming dynasty Urn
- Metals, except for certain types of bullion
- Gems: Although Diamonds, rubies, emeralds, and sapphires are nice but not in this case
- Stamps: Purchasing the first stamp ever made gives you bragging rights but funding cannot come from your IRA
- Coins, except certain minting by the US Treasury
- Alcoholic beverages: 1787 Chateau Lafite, leave it in the cellars of others if you were thinking about purchasing it from your self directed IRA
For more information on collectibles, go to the IRS website for publication 590.
Taking active use of a self directed IRA instead of leaving it to the topsy turvy stock market can be a lucrative option in our current economy.
Of course not all investments are guaranteed to have a positive return, but in the current real estate market the possibility of a positive return is more likely, especially from the stand point of being a private lender.
A private lender creates a loan to a person or entity with the property as collateral; in effect you become the bank.
As a private lender it is not your concern to pay property taxes, insurance, etc. as with owning the property. This would only become your concern if you were to foreclose on the property. Even in a foreclosure you would still benefit by either selling the property or keeping it for cash flow to add to your self directed IRA account.
When deciding to use your IRA to become a private lender, remember not all custodians are created equal. IRA laws do not prohibit investing in real estate but trustees are not required to offer real estate as an option. Some custodians do not allow usage of an IRA for real estate investment.
For more information about investing in real estate using your IRA email or call us we will also send an e-book on cycles. Everything has a cycle, this e-book explains how you can use this information in investing among other things. For tax questions please call the IRS (800) 829-1040 or visit their website http://www.irs.gov/retirement/article/0,,id=111413,00.html#return
