IRA's And Real Estate
Anyone have experieince with purchasing land and placing it into an IRA? This seems like an interesting option especially when purchasing raw land in growing areas.
Info or links to sites would help. Thanx in advance.
Cheers,
zehnder3
What do you mean purchasing land and placing it into an IRA?
Traditional IRA Yes, if you are under age 59½ and the withdrawal is not for the following reasons: • Death of the account owner • Part of a series of substantially equal periodic payments • Health insurance premium payments for unemployed individuals • Payments of medical expenses in excess of 7.5% of an individual's adjusted gross income • Qualified First Time Homebuyer • Higher Education Expenses • IRS Levy
Roth IRA Contributions can be withdrawn at any time without penalty. For earnings, penalty applies if you are under 59 ½ and the withdrawal does not qualify as: • Qualified higher education expenses; • Qualified first home purchase (lifetime limit of $10,000); • Certain major medical expenses; • Certain long-term unemployment expenses; • Disability; or • Substantially equal periodic payments.
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Lots of IRA holders do use their IRA funds for RE investment.
Several big companies do lots of SDIRAs (self directed) IRAs for their customers.
Equity Trust, Pensco, Entrust...find any of these online and read to your heart's conent as to how to utilize their services to buy RE, notes, Mobile Homes, lots of other investments.
Check out books and resources here, on this site, under books, for further info on this.
I took the advice and have done research. Appears that most any type of real estate can be tranferred into an IRA (residential, commercial, raw land...).
New questions have now surfaced from my research. Is it difficult/expensive to obtain a "non recourse loan?" Second, is it possible to take out an equity line on the property given it has appreciated in value? Finally, if this is in a Roth IRA...what are the different implications?
Lots of questions and also appreciation for responses!
Cheers,
zehnder3
I don't have good answers to these questions, but I want to keep this issue near top of list.
I don't think the non-recourse loan is a problem. Standard industry procedure, right?
I don't think an equity loan is permissible, but I'm not sure. I thought the property had to be owned outright in order to avoid unrelated business taxable income.
I've never seen a Roth IRA used for this purpose, but I can't think of a reason why you couldn't. I think the reason I've not seen it is because it's less common for people to have large amounts of money in their Roth IRAs at this point - since they are new and you can't roll over 401ks into them (unless a conversion is done). I'd ask one of those companies like Equity Trust www.trustetc.com about it and see what they say.
As always, watch out for the prohibited transaction rules in this area. Know what you're doing before jumping in.
I was just looking at an interesting site today right on this subject...by Entrust, which is one of the big SDIRA custodians.
Anybody is welcome to subscribe, FREE, to their QA newsletter, which I just did and I recommend you do too.
In first two issues, some good discussion of this subject, the non-recourse loan (which is legal), and lot of other that any IRA holder should read.
I know that lots of private lenders would be happy to have the NR Loan, but don't know about the Fin. institutions...chances are there are a number of them that do.
I recently took the plunge and went with Equity Trust for mine. On the subject, I'm curious is the same options apply to 529 plans for children's college savings. I know you can have the account be a self-directed one, but does anyhone know if you can buy real estate with it?