Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Self Directed IRA real estate investing
Old 08-02-2011, 11:00 PM   #1
Dryer sheet wannabe
 
Join Date: Apr 2011
Location: Missouri
Posts: 12
Self Directed IRA real estate investing

I am investigating self directed IRA administrators that allow real estate transactions. Does anyone have experience doing that and who did you use, and what was your experience?
__________________

__________________
o2chim2 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-03-2011, 09:20 AM   #2
Recycles dryer sheets
 
Join Date: Jul 2008
Posts: 136
I have a friend that looked in to this. His suggestion was to not bother with doing it.

Some of the issues:

RMDs
maintenance and repairs
liquidity


The real kicker was that he said something about trying to find a custodian that was willing to handle all of this. Seems there aren't very many, and from what he said it was cost prohibitive.
__________________

__________________
TN_INVEST is offline   Reply With Quote
Old 08-03-2011, 07:56 PM   #3
Recycles dryer sheets
 
Join Date: Sep 2004
Posts: 174
One of the biggest reasons to own real estate is the tax-advantages (not available via IRA)

If you're still not convinced, just Google "Prohibited Transactions" and that should scare you straight
__________________
Berkshire_Bull is offline   Reply With Quote
Old 08-07-2011, 10:43 PM   #4
Dryer sheet wannabe
 
Join Date: Apr 2011
Location: Missouri
Posts: 12
Bershire Bull

What about building a spec house to sell. There are a few options of financing. 1. Get a construction loan and pay interest to a lending institution. 2. Pay for it with cash outside the IRA... don't have that much cash outside IRA. So that would require withdrawing from the IRA and paying income tax on the money....25% estimated. 3. Establishing a self directed IRA with administrator that permits real estate transactions fees would be approx. $600 annually,with all profit going back into the IRA, no tax on profit, no interest to lending institute, no income tax on withdrawing money from IRA.... What do you think about this ??
__________________
o2chim2 is offline   Reply With Quote
Old 08-07-2011, 10:43 PM   #5
Dryer sheet wannabe
 
Join Date: Apr 2011
Location: Missouri
Posts: 12
Sorry.... I meant Berkshire_Bull
__________________
o2chim2 is offline   Reply With Quote
Old 08-08-2011, 09:56 AM   #6
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 184
This was recently discussed in "Real Estate In A ROTH" started by wallygator69 on 07-02-2011.

Check it out, it will ans many of your questions.
__________________
HpRyder is offline   Reply With Quote
Old 08-08-2011, 08:57 PM   #7
Recycles dryer sheets
 
Join Date: Sep 2004
Posts: 174
Quote:
Originally Posted by o2chim2 View Post
Bershire Bull

What about building a spec house to sell. There are a few options of financing. 1. Get a construction loan and pay interest to a lending institution. 2. Pay for it with cash outside the IRA... don't have that much cash outside IRA. So that would require withdrawing from the IRA and paying income tax on the money....25% estimated. 3. Establishing a self directed IRA with administrator that permits real estate transactions fees would be approx. $600 annually,with all profit going back into the IRA, no tax on profit, no interest to lending institute, no income tax on withdrawing money from IRA.... What do you think about this ??
Per IRS regulations you nor family members can do no work on the property, neither you nor any family members can ever utilize the property in any way. Any violations of the above = prohibited transaction.

Any gains or rent you may make remains in the IRA meaning you've just taken something whose whole appeal is tax advantages (real estate) and turned it into ordinary income at some point in the future.
__________________
Berkshire_Bull is offline   Reply With Quote
Old 08-08-2011, 10:52 PM   #8
Recycles dryer sheets
Red_y's Avatar
 
Join Date: Aug 2004
Posts: 77
o2chim2 -- I'll provide some information about custodians for a Self-directed IRA...these two are usually mentioned as experienced, ethical operators who could help you set up an IRA to contain real estate assets:

PENSCO Trust Company
Client Services (800) 969-4472
Web Site www.penscotrust.com

FISERV ISS (Formerly Lincoln Trust Company)
New Business (800) 521-6974
Current Account Holders (900) 962-4238
Web Site www.fiserviss.com


I'm not as negative on the idea as the other people who have replied. I have a Roth IRA with about a $140k balance, $80k of which is in HSTRX as a hedge against passive indexing being the be-all-and-end-all. The fund has held up well in the recent market carnage, but has a paltry 0.92% yield and a YTD gain of 2.31% (yawn).

So my thinking is, what would be so bad about taking $40k out of HSTRX, putting it into a self-directed IRA, and buying a condo in a resort area that I like for cash? All the rental income would go into the Roth, and hopefully cover condo fees, cleaning fees, taxes, etc. with something left over to increase the Roth portfolio value.

In 5 years, when I'm 59 1/2, I take the condo out of the IRA (TAX FREE) and use it for my own recreation, rent it out, or sell it for what I hope will be a higher price in a recovered real estate market.
__________________
Red_y is offline   Reply With Quote
Old 08-08-2011, 11:01 PM   #9
Full time employment: Posting here.
arebelspy's Avatar
 
Join Date: Apr 2011
Posts: 625
Quote:
Originally Posted by Red_y

In 5 years, when I'm 59 1/2, I take the condo out of the IRA (TAX FREE) and use it for my own recreation, rent it out, or sell it for what I hope will be a higher price in a recovered real estate market.
If you're going to do the latter, do it before you take it out of the ROTH.
__________________
arebelspy is offline   Reply With Quote
Old 08-09-2011, 11:37 PM   #10
Dryer sheet wannabe
 
Join Date: Apr 2011
Location: Missouri
Posts: 12
Can you use it etc. while it is still in the IRA? Will IRA regulations permit this?
__________________
o2chim2 is offline   Reply With Quote
Old 08-09-2011, 11:40 PM   #11
Dryer sheet wannabe
 
Join Date: Apr 2011
Location: Missouri
Posts: 12
I agree that there are some advantages and of course disadvantages to real estate in self directed IRA..... Building or buying with cash from the IRA to me is a BIG positive.
Surprised that no responses yet from anyone on here that is or has done this?
__________________
o2chim2 is offline   Reply With Quote
Old 08-09-2011, 11:57 PM   #12
Recycles dryer sheets
Red_y's Avatar
 
Join Date: Aug 2004
Posts: 77
Quote:
Originally Posted by o2chim2 View Post
Can you use it etc. while it is still in the IRA? Will IRA regulations permit this?
You absolutely can not use the property yourself while it's in the IRA. That would be a prohibited transaction per IRS rules. Good layman's discussion of prohibited transactions here: Real Estate in Your IRA
(and yet another source pooh-poohing the whole idea)

That's why in the scenario of my rental condo at the ski area above, there would be a custodian like PENSCO Trust handling the purchase, a property management company handling the rental aspect, and no use by me of the property until I've turned 59 1/2 and transferred ownership of the condo from the Roth IRA to me.
__________________
Red_y is offline   Reply With Quote
Old 08-10-2011, 05:39 AM   #13
Recycles dryer sheets
 
Join Date: Jul 2008
Posts: 136
Quote:
Originally Posted by o2chim2 View Post
Can you use it etc. while it is still in the IRA? Will IRA regulations permit this?
As pointed out already. NO!

My advice: Run, don't walk, away from this idea.
__________________

__________________
TN_INVEST is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
More Real Estate Fraud -- Short Sales chinaco FIRE and Money 34 07-19-2011 07:57 AM
Real Estate In A ROTH wallygator69 FIRE and Money 6 07-05-2011 09:27 PM

 

 
All times are GMT -6. The time now is 10:45 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.