Defining The Real Estate Ira

A self-directed IRA that holds real estate,
also referred to as a real estate IRA, is
becoming an increasingly popular way
individuals are choosing to diversify their
retirement portfolios. The easiest way to
add real estate to your IRA is to purchase
the property outright with funds from your
IRA. Its also possible to invest in real
estate by having your IRA obtain financing
in the form of a non-recourse loan.
Six reasons why you may want to consider
adding real estate to your self-directed
IRA:

1. Invest in what you know. Perhaps youre
already active in real estate investing.
This is an opportunity to capitalize on
your knowledge to enhance your tax-deferred
retirement assets.

2. Acquire your retirement home now and own
it as an investment in your IRA. Simply
purchase the home with IRA funds and rent
it out to generate a return for your IRA
until you are ready to retire. Upon
retirement, you may request a distribution
of the property and get ready to move into
your new home!

3. Diversify your retirement investments.
When stock market values fell so
dramatically in 2008, some investors
discovered firsthand the dangers of being
too heavily invested in one type of asset.
While real estate values declined as well,
many investors feel more comfortable
spreading their retirement portfolio across
a variety of assets that may include
alternative assets such as real estate.

4. Favorable tax treatment. Investments
that generate cash flow (income) are often
well-suited for IRAs because the income is
tax-deferred, or tax-free in the case of a
Roth IRA for qualified distributions).
Additionally, if you are buying and selling
property to make a profit within your IRA,
there are no capital gains taxes imposed on
each sale. You only pay taxes on
withdrawals from a Traditional IRA. In a
Roth IRA, qualified distributions are tax-
free. These tax benefits may be reduced if
an IRA purchases real estate using debt
financing.

5. Cash flows and potential asset
appreciation. Like other investments, real
estate may increase in value over time. In
addition, it is one of a few tangible
assets that can generate income (rent)
within your IRA.

6. Preference for tangible assets. If you
like the idea of walking in, on or around a
piece of land, a home or even an apartment
building, IRA-held real estate may be an
option for you. Keep in mind that you, your
family members and other disqualified
parties may not use the property while it
is held in your IRA.

Some of the most popular types of real
estate held in IRAs include:

Single-family homes
Commercial property
Apartments, townhomes and

other multi-unit homes
Developed or undeveloped

land
Student housing
Time shares and fractional

ownership properties
Condominiums
Parking lots and garages

Other real estate related investments that
may be attractive to an individual not
looking to own actual property include:

Mortgage notes and trust
deeds
Tax lien certificates

Keep in mind, real estate is only one of
many types of investments that can be held
in your self-directed IRA. With a self-
directed IRA from a high-quality company,
each client has the opportunity to
diversify their investment portfolio by
selecting traditional, marketable
securities (such as stocks and mutual
funds) as well as unique assets such as
real estate, private placements, private
corporate notes, offshore funds, deeds of
trust, hedge funds and many more.