Stake your claim.
A self-directed IRA in real estate presents an exciting option to put your knowledge of the real estate market to work. Like any self-directed IRA, it’s important to have a firm grasp of the type of property or land you plan to invest in and the rules and regulations regarding such investments.
Here’s the broad range of investment opportunities you have at your disposal:
Residential Property
Residential property offers you the option to buy, rent and sell homes within your IRA. All income generated by the property stays in your IRA and all expenses (taxes, improvements, etc.) are paid from the IRA.
Commercial Property
Invest in commercial properties like office buildings, storefronts and warehouses. You can even take out a non-recourse loan to invest in these types of properties if you can’t afford to buy them outright with your IRA.
Mortgage Notes
Use your IRA funds to help others purchase properties. The fees and interest will accrue inside your retirement account on a tax-deferred or tax-free basis.
REO Properties
In certain real estate markets, you can use your IRA to purchase distressed properties. These properties offer investors the option to buy low and, with a little work, sell for large profits which stay in your IRA.
Apartment Buildings & Condominiums
Self-directed IRAs can be a very powerful tool for buying apartment buildings. You can buy an apartment building through a multi-member LLC with a portion of the funds coming from your IRA or invest through an IRA loan to cover the purchase cost.
Raw Land
Purchasing raw, undeveloped land through your IRA is a low maintenance way to invest in real estate, without all the headaches associated with upkeep. For most parcels of land, property taxes will be one of your few expenses.
Improved Land
Improved land refers to land that has certain utilities and services available to it like electricity, water, sewer and telephone lines. This type of real estate investment is similar to raw land but has increased potential for development.
Onboarding a new private alternative investment to STRATA's platform starts with a pre-custody review to ensure we can custody the asset.
Funding the purchase of Real Estate in an IRA
There are several ways to fund your purchase:
Direct Purchase is the simplest and quickest way if you have cash available in one or more IRAs.
Your IRA can partner with other individuals that invest (either through an IRA or as a personal investment).
Your IRA can obtain a non-recourse loan, often called leveraging. We work with non-recourse lenders like North American Savings Bank and First Western Federal Savings Bank that are familiar with this form of lending.
What you need to know about Prohibited Transactions in an IRA
The decision to invest in real estate with your retirement funds can have some powerful benefits. However, you need to be aware that IRAs and retirement accounts are governed by rules pertaining to prohibited transactions and disqualified persons.
Prohibited transactions disqualify an IRA and carry significant penalties and taxes. You should thoroughly understand the prohibited transaction and disqualified person rules before you begin any real estate transaction.
In addition to prohibited transactions, STRATA will not permit the purchase of foreign real estate property or property in foreclosure.
