self directed ira for real estate

Investing In Real Estate With Your IRA

As you know, real estate is at a 30-year low right now in many markets.  Recently all over Wall Street Journal, New York Times, and countless other publications, there have been stories about big Wall Street companies jumping in and buying real estate rather than stocks… because they know they can get a better return.

So, why are most Americans still trusting their own retirements… IRAs… 401ks… with the stock market?

The answer is they don’t know any better.

Before we dive into the good stuff… remember we are not financial advisors, and by no means should this guide be meant to act as financial, tax, or legal advice.  It’s for informational purposes only. Consult your own professional advisors before you make any financial choices like this.

The Self-Directed IRA for Real Estate

There’s something called a Self-Directed IRA.  They’ve been around for a while… and in the past several years, many people have realized that their IRAs aren’t earning them a darn thing (sometimes even losing money).  So, those people (maybe this is you) have started to look for other ways to earn better returns with that same IRA.

Enter the “self-directed IRA”.

A self-directed IRA is simple. It’s a retirement account that has the same tax benefits as a regular IRA… but you have more flexibility in deciding what you want your IRA to be invested in.

You can invest in…

  • Real estate (commercial, income-generating rental property, rehabs, etc.)
  • Promissory Notes secured by mortgages (i.e., private lending)
  • Tax lien certificates
  • Limited partnerships
  • LLC’s
  • Sub-C corporations
  • Real estate options
  • Some types of precious metals
  • … and the regular investments like stocks that your regular IRA can invest in

Basically, this opens it up so you can buy investment real estate with your IRA… or be a private lender in real estate.

Are There Restrictions?

Yes, there definitely are.  There are restrictions on what you do with the real estate if you buy and hold… what types of precious metals… and often times the “custodian” of the SDIRA has restrictions on what they think you can and should invest in.

A custodian? What’s that?

Great questions.

Self-Directed IRA Custodians

The US Government created the SD-IRA loophole to help investors take more control over their investments while at the same time still getting the tax benefits. But, at the same time… they don’t want people setting up these SD-IRAs and just doing whatever they want.

So there is a barrier they have to have in place… and that’s the custodian.

The custodian is usually the Self-Directed IRA company who you have your IRA with. They act as the “go-between” when you’re going to invest.  Many custodians have guidelines on what you can invest in, how long it will take for you to actually make your money work for you once they approve the investment… etc. Some custodians are more passive… and let you actually have a checkbook where you can write checks from your SD-IRA to make investments.

You should do your homework and find the custodian that’s right for you.  Here are a few that we know and respect:

Do some research to find the right fit for you.

Some have more expensive fees than others… and some give more flexibility than others.

TOP 5 QUESTIONS To Ask A Self-Directed IRA Company Before You Work With Them:

Before you sign on with an SD-IRA company… ask them a few key questions.

  1. What are your fees?  – Fees can vary wildly. Some charge an annual fee based on the account’s value. Some charge an annual fee. Some charge hefty setup fees, etc. Find out what works for you. But the idea is that by being able to invest in real estate with your IRA… you’ll more than makeup for the fees you’re paying with your higher returns.
  2. What’s the process for approving an investment? – Some companies can take up to 30 days+ to fund an investment after you send it in for approval. Some SD-IRAs give you what’s called “true checkbook control”, where you actually get a checkbook where you can write checks from your IRA account… which gives you immediate access to the funds (i.e., to close a deal quickly). Checkbook control is usually a tad more expensive than an IRA account that requires all investments to go through the sometimes lengthy custodian approval process, but again… find out what’s best for you.
  3. Are there any restrictions on what I can invest in? I want to invest in real estate and make private loans. – Some SD-IRAs with larger, more traditional companies like Schwab and SmithBarney restrict what your account can invest in.  Some don’t allow real estate… while others do.  Just ask.
  4. Is my retirement account eligible to “roll over” into an SD-IRA? – Not all retirement accounts can be rolled over into a self-directed IRA.  Most IRAs can be… and even some 401(k)s can be. Just ask your financial advisor and ask the representative at the SD-IRA company you’re working with.
  5. How long will it take for my account to be up and running and have funds available for investment? – Some people wait way too long to get this process rolling. If you know you want to use your IRA to invest in real estate… get the ball rolling on getting it rolled over into an SD-IRA account asap.  Some companies may take weeks or even over a month to have your account set up, complete, and ready to invest.  So, don’t wait until you’ve found a great real estate deal to get started… get started today so your funds are ready to invest when you need them.

Getting Off The Sidelines And Getting Your Money Working For You

If you feel a self-directed IRA may be an excellent way for you to invest a portion of your retirement in things you know (rather than the unpredictable stock market)… then dive in, and take some time to educate yourself on the pros and cons of an SD-IRA (those websites I put above are a great place to start. They have all kinds of resources to learn more about self-directed IRAs and how you can use them to invest in real estate).

If you have any questions on how to work with us as an investor… just connect w/ us through our contact form or call us anytime at:  .  We are currently working with several investors who utilize their SDIRA as a tool for private lending.  It’s an excellent way for them to create passive income without all the work of finding real estate deals, maintaining property, or becoming a landlord.  They partner with us to get the returns of real estate without the headaches. To explore more about SDIRA or private lending, please feel free to reach out to us at any time. We have an SDIRA ourselves and have experience working with people to get them switched over to an SDIRA and get their money working for them right away!

Happy investing!  We’re here as a resource for you, so don’t hesitate to connect with us anytime.