An REO (real estate–owned) is a property that has been repossessed by a bank after an unsuccessful sale at a foreclosure auction. The bank lists the property on their books as a nonperforming asset.
But what does that have to do with your IRA?
With more and more of these REO and foreclosure properties for sale, you have a great opportunity to diversify your retirement portfolio. As an individual, you might not have the amount of cash readily available in your personal finances to purchase such a property, but you might have enough in your retirement plan. If it does, you can establish a self-directed IRA and invest the funds in an REO or foreclosure as an income property.
By vesting the title in the name of your IRA, any incoming or outgoing funds must go through your IRA directly. Because some of the properties will require a little tender love and care to get them back in shape, consider all the costs and determine the amount of funds that you are comfortable investing by doing your due diligence and consulting with a tax professional.
Since you’ll inevitably need to make repairs on the acquired property but should not be using any personal funds to do so, the IRA check card is an easy option for paying for repairs and maintenance with funds directly from your IRA.
It’s important to be aware of the prohibited transactions and rules that apply to this kind of investment, but the opportunities are endless and exciting when you are educated and informed about how to put your IRA funds to work for you, even in this ever-changing market. And Entrust is there to help facilitate every step.
Contact us to get started on establishing a self-directed IRA.
Munzer Ghosheh, Business Development Manager
310-899-3811
MGhosheh@theentrustgroup.com
While the recent housing downturn has been devastating for many, it has also created incredible buying opportunities for
real estate investors. In fact, did you know that you can purchase your next foreclosure with your
IRA? It’s true. You can buy foreclosed properties in a self-directed IRA and, depending on the type of IRA, you can accomplish this absolutely tax free!
So how does this all work? It’s actually quite simple. First, you must establish a truly self-directed IRA with an administrator such as
Entrust IRA Services that allows you to have real estate investments as part of your portfolio. You then select the property that you want to acquire. If you don’t have enough funds in your retirement plan, you or someone else can partner with your IRA to complete the purchase. You can also leverage it with a nonrecourse loan. After the property is purchased, all repairs, renovations, taxes, or other expenses are paid for from the IRA, and all rental income goes into the IRA tax deferred or tax free. If your IRA is partnering and only owns a portion of the property, all expenses and income are based on the percentage that the IRA owns. All in all, it’s a very straightforward process, and
Entrust can oversee and facilitate every step of the way.
Buying foreclosed properties and taking advantage of the bargain prices we are currently seeing is a great way to maximize the potential of the retirement fund that you have worked so hard to establish, while steering away from the volatility of the stock market and other risky investments.
Although self-directed IRAs account for merely 2% of the over $4 trillion retirement dollars out there, they are among the fastest growing segments. With a self-directed IRA, you have 100% autonomy over the investments you make. So take control of your retirement future by establishing a self-directed IRA today!
By
Munzer Ghosheh, Entrust IRA Services
mghosheh@theentrustgroup.com
2008 marked the collapse of some of our largest financial institutions and most of us have seen our retirement accounts shrink significantly as a result of the unprecedented stock market decline in recent history.
There are about 55,000,000 IRAs and a staggering 95% of the trillions of dollars in those IRA funds are invested in Wall Street. In the wake of the market turmoil, what we are beginning to see is that a growing number of investors are deserting Wall Street and deploying their funds to truly self- directed retirement plans. As a result of poor performance in the stock market, more and more IRA holders are seeking direct control and empowerment of their retirement investments.
What is the benefit of making such a move? The main advantage of a truly self-directed IRA is that it allows the account holder flexibility to invest in all "allowable" assets, not just securities. That includes both "traditional" investments such as stocks, bonds, CDs and "non-traditional" investments such as real estate, trust deeds, notes, private stock, LPs, futures in addition to so much more. Currently, the retirement portfolios held in ‘traditional" IRA accounts in banks and brokerage firms offer only a limited menu of financial products with the incentive of making commissions. However, an Administrator of a self-directed IRA account like Entrust does not sell or promote any product and all fees are only made by doing the administration and record keeping of the IRA account.
So why limit your investment choices in your retirement plan? Take control of your financial future and expand the wealth generating potential of your assets with a truly self-directed IRA.
Munzer Ghosheh, Business Development Manager
mghosheh@theentrustgroup.com