Real Estate Rentals in Your IRA?

Jane Gray
Published on January 24, 2017

Real Estate Rentals in Your IRA?

Everyone talks about diversification, but are you really diversified for retirement?  Are you maximizing your ROI?

If you have an IRA or Roth, the IRS allows individuals to purchase rental properties inside of their IRA. This is true of 401(k) rollovers, Inherited IRAs, SEP IRAs, Roth IRAs and of course Simple IRAs.  The vehicle is otherwise known as a Self-Directed IRA.  Besides real estate, you can invest in promissory notes, precious metals, and private company stock.

You might ask why you haven’t heard about this opportunity before and the reason is that the large financial institutions that administer U.S. retirement accounts generally don’t want the overhead of managing real estate or non-publicly traded assets.  Another reason is that their core business revolves around the stock market – they are in the business of selling stocks, bonds, and mutual funds.

The administrators of self-directed IRAs are specialists in the “alternative” assets of Real Estate and the like. The self-directed IRA receives the same tax-deferred (IRA) or tax-free (Roth) treatment that an IRA receives when buying or selling stock.  In a typical company 401(k) or a typical brokerage IRA, you don’t pay capital gains tax on the gains from the sale of the stock.  Likewise, when you buy or sell real estate  in a self-directed IRA, you won’t be paying capital gain tax on any gains from the sale.

Wouldn’t it be great to purchase rental properties inside your IRA?  Think about it.  Rents from residential or commercial properties go right back into the IRA.  A sale of a single appreciated property can be parlayed into purchasing more.  Interestingly enough, there’s even a way to have your IRA finance a rental property!  The details of which are a little more complex than I can cover in this post.

The bottom line is that you don’t have to have all your retirement eggs in one basket and you can invest in rental properties and benefit from the benefits the IRS confers on retirement accounts.

Real Estate Rentals in Your IRA?
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