I am 63 and have been retired for 8 years. My Rollover IRA is valued at about $800k and represents 1/3 of my total assets. My husband and I still bring in $150k per year through rental income that he owns. (We married later and keep our investments separate.) We live below our means and spend $70k annually. I have a friend who rolled over her IRA into a self directed rental property. Has anyone done this or know of anyone who has? I’m wondering what the rules are and want to be sure I’ve reviewed all considerations. Thank you in advance.
IRA 1035 Exchange thoughts
- Thread starter Dot57
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Just a thought. If your IRA is in a rental property. How would you handle RMD when the time comes? If the value of the rental IRA is large, would the income generated cover the RMD? How would you take a " RMD distribution " from a rental property?
Maybe, your friend could answer this question. Or maybe your friend's plan is to liquidate prior to RMD.
Maybe, your friend could answer this question. Or maybe your friend's plan is to liquidate prior to RMD.
euro
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I suggest you post this question in the Biggerpockets.com forum There are some real SDIRA experts on there who will be happy to explain in any detail you want.
There are some tricky aspects of holding real estate in SDIRAs. For example, you cannot do any maintenance or management work yourself as hat would consitite an illegal IRA contribution. Also there are some aspects (look up UBIT and UDFI) where parts of the income is subject to taxation even inside the IRA. So, what you seem to want to do is possible, but requires some research. Again, the guys over on biggerpockets.com will have plenty of answers.
I'm not sure what you are referring to with 1035. That is usually a way to defer capital gains taxes of a commercial (or rental) real estate sale by purchasing/rolling into new real estate of equal or greater value. This would not apply to IRA situations though.
Onward
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The rules for physical real estate in IRAs are complex and, IMO, very burdensome.
Penalties for rule violations are severe.
Prepare yourself.
Penalties for rule violations are severe.
Prepare yourself.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
@Dot57, this is more complex than just asking SGOTI. Start with your CPA, then also talk to your IRA custodian. I used to hold private placement stock in my IRAs, but this was an "unusual asset" and not all custodians will take these. Specifically, Schwab use to do it but IIRC about 20 years ago they cut that off.
I can't imagine that what you want to do would be worth the hassle unless you are doing some self-dealing with the specific real estate and that would be another can of worms. If you just want to hold real estate, buy some REITs. If you want to hold local real estate check with your attorney, CPA, etc. to see if you can find a local limited partnership offering. If you get extremely lucky, you might find a limited who wants to get out and who will sell to your IRA for a big discount. These are illiquid assets and hard to sell. Then you will still have to find a custodian who will take the asset and pay their fees.
A 1031 exchange is not in scope for this deal.
I can't imagine that what you want to do would be worth the hassle unless you are doing some self-dealing with the specific real estate and that would be another can of worms. If you just want to hold real estate, buy some REITs. If you want to hold local real estate check with your attorney, CPA, etc. to see if you can find a local limited partnership offering. If you get extremely lucky, you might find a limited who wants to get out and who will sell to your IRA for a big discount. These are illiquid assets and hard to sell. Then you will still have to find a custodian who will take the asset and pay their fees.
A 1031 exchange is not in scope for this deal.
