He has built his career helping clients build long-term wealth with real estate. What if you could use your knowledge to strengthen your own financial future? With a self-directed IRA, you can do exactly that.
What is a self-directed IRA?
TO Self-directed ARI (ARDS) it is simply an IRA. What sets it apart is access and control; and with an ARDS, both are unlimited. Your investment options go beyond the typical stocks, bonds, and mutual funds offered by banks. Instead, you can diversify your retirement portfolio with alternative investments, like real estate.
Investing with an ARDS does not mean that you are committed to a certain type of real estate either. Popular options include developed or undeveloped land, single-family homes, commercial real estate, multi-family homes, or even mortgage notes. As with your clients, your real estate experience is your greatest asset.
Choose the correct account type
Being a real estate agent means that chances are high that you are self-employed. In addition to necessities like taxes and health insurance, you are also responsible for your retirement planning. With an ARDS, you have as much control over this as you do with the rest of your small business.
There are a number of accounts that may be tailored to your needs, each with its own tax advantages, contribution limits, and eligibility requirements. Traditional IRA, Roth IRA, SEP, and SIMPLE plans can be self-directed so you can use them to invest in real estate and other alternative assets. To find out how they work and how they differ, check out our Account Guide.
How to Invest in Real Estate With an ARDS
When you are self-directed, your practical experience becomes the foundation of your retirement strategy. And your ARDS is the recipient that executes it. The real estate buying process with an SDIRA is not much different from a standard transaction. However, there are some Rules and regulations you must continue to keep your account current.
Here’s a quick overview of how it works:
- Open an ARDS. As mentioned, you can choose from a few different account types. Consult your tax advisor if you are not sure which option is the best for you.
- Fund your SDIRA through a transfer, reinvestment, or cash contribution. If you want to roll over funds from an existing IRA or employer sponsored plan, you can do so with a roll over or rollover. You can also start by making a cash contribution and growing your account year after year. Learn more about the different financing methods here.
- Find the right property and determine your buying strategy. Some popular options include direct purchase, partnership, leverage, or through a limited liability company (LLC).
- Instruct your SDIRA provider to initiate the transaction. Make sure the contract is titled with the name of your SDIRA as the buyer. For example, “The Entrust Group FBO (for the benefit of) [Client Name] [Account #123456]. “Once the contract is executed, your provider uses your SDIRA funds for the security deposit.
- Close the escrow. At this time, you will submit any remaining paperwork, such as an award deed, title report, or closing cost statement to your SDIRA provider. They will then send the funds to finalize the transaction.
After these steps are completed, the investment property belongs to your SDIRA. This means that any income and expenses related to the property will go through your SDIRA; not your personal funds.
What should you do next?
Learn more about the process for investing in real estate with an ARDS. Get your free copy of our 5 steps to investing in real estate guide today.