Self Directed Retirement Plans

Did you know there are ways of controlling your 401k account yourself? The stock market is soaring, but that very fact may encourage some people to invest a portion of their 401k in something more directly under their control. What else is in a strong market? Answer: real estate. Here’s how.

Individual Retirement Accounts

News to many is that real estate can be held in IRA or 401(k) accounts in the same manner as traditional securities. Real estate investors may not realize that tax-advantaged funds may be allocated toward their familiar investment avenues. Furthermore, yielded income will bear those same tax advantages. The process may seem complicated given IRS parameters and titling requirements, but education-based IRA providers can assist you every step of the way.

Should you be interested in purchasing real estate through your IRA, there are some key considerations. A knowledgeable realtor can connect you with trusted providers of self-directed IRA accounts, help you locate a suitable property, finalize the deal, and help you through closing. From a processing perspective, initiating a retirement investment is comparable to initiating a personal one.

  • In a real estate purchase you can leverage up to 65% of the value of the property. This you cannot do with stocks or gold bullion!
  • The borrowing is made through a “non-recourse” loan. (In other words, the only collateral involved is the property itself.)
  • If your IRA purchases investment property, it goes on title as the owner of the property. Your plan must be sufficiently funded to cover inherent expenses, including down payments, maintenance costs, etc.
  • You may not yourself perform any services to the property to avoid maintenance expenses, and certain family members are disqualified, too.
  • Yields from the asset must return to the account.

The rules and guidelines may seem complex and you will need professional help in working through them and managing the account, but they shouldn’t dissuade you from diversifying your self-directed retirement portfolio with real estate.

If you are interested in learning more, step inside the KL Realty office or give us a call at 303.444.3177.