Updated September 29th, 2021
There are many ways to invest your money in retirement, but if you’re the kind of person that likes being adventurous and on their own path then self-directed IRAs might just be perfect for you.
A self-directed IRA is a type of retirement account that legally structures like a traditional or Roth IRA, but it has some features which sets it apart. The only constant between a traditional IRA and self-directed is the annual contribution limits and potential tax advantages. However, a self-directed IRA allows persons to take advantage of “non-traditional” or “alternative” investments. This can include investments like gold and silver, and of course the primary use of this article: real estate.
Banks, brokerage firms and insurance companies have historically controlled the type of investments made with IRA’s. These are typically more traditional investments like stocks and bonds. However today, we’re able to make much more sound investment decisions due to greater access to information. Self-directed IRA’s can be used in retirement to help individuals diversify their assets and continue to build wealth.
Why Real Estate?
Real estate – or privately owned property in general – has been a key way for people to build and pass on wealth throughout generations. It’s still equally important to us today, obviously, we all need places to live. This sets this “alternative” investment apart from others like precious metals, which don’t hold much use for the average person anymore.
This is just a matter of what makes the most sense to you. Would you rather your wealth be tied up with Wall Street? Or would you rather have capital tied to tangible assets? Each has their own value and can be equally useful depending on your investment needs. However, with a self-directed IRA you’re able to conduct your own research, make your own financial decisions, and you’re more likely to make a greater return.
How Does It Work?
You can go about a self-directed IRA one of two ways. You can either place the money through a custodian that specializes in self-directed IRAs, or open and fund your account via a checkbook IRA account. It’s important to do your homework before you invest in anything. You should know what risks are involved, and how much of the potential reward is actually worth risking.
How To Invest In Real Estate
This is important; if real estate is purchased improperly with your IRA, it can disqualify your account. This will result in all of your funds being taxable. Here are some basic rules to live by if you’re going this route:
- No selling to or purchasing from either yourself or a related person.
- No hands-on repairs and/or upgrades done to the property; hire professionals.
- No benefits – meaning you can’t live on the property nor rent to relatives.
Your real estate should be for investment only. All invested money must go through the the custodian. This is true if the property is to sell as well, proceeds must go to the custodian or checkbook account.
Of course, there are more guidelines that you have to follow if you plan on using your self directed IRA for real estate in Orlando… so make sure you do your homework and do these two things immediately:
- Find a great self directed IRA company / custodian: This is the first step. You have to get this in place before you even think about purchasing anything through your IRA. If your current IRA holder won’t allow you to buy and hold real estate in it… call us at 407-974-3270 and we’ll refer you to the best local custodians… and they’ll be able to help you transfer your current IRA to your new self directed IRA.
- Find a couple great Orlando investment property experts, like us at Florida Property Warehouse. One of the best ways to get great properties here in Orlando FL is by working with a professional investment property company like ours. We find high discount properties (both single family and multi-family) all around Orlando and sell them to investors like you at discounts so you can turn them into solid profitable rental properties. Join our Preferred Buyers List Here >>
Just reach out to us at the phone number below or send us an email… and we’ll walk you through the process, point you to the best SD IRA resources locally in Orlando, and get you on our Preferred Investment Property buyers list.