Investing Your IRA In Real Estate
You may have been told in the past that it is illegal or disadvantageous to invest funds from your IRA in real estate. This is a line of reasoning that has been floating around for years and it is even less true now than it was then. Under the strictest interpretation of the law, it is still permitted to own real estate within an IRA. It is not the law but the plan document (the document governing an IRA) that usually prohibits real estate.
As far as the investment of IRA funds in real estate being unfavorable--that depends. A good investment is a good investment, and vice versa. With the wrong IRA custodian, a transaction as complex as a real estate negotiation can generate a boat-load of fees which can severely affect your profit margin. Additionally, any expenses associated with the property will also have to be paid from the IRA which can also bring about more custodian fees.
The moral here is that real estate investing with IRA funds can be crucial and costly if you do not have the right type of account and the right custodian. The best account for real estate investing is a self-directed IRA LLC. Such an account can give the IRA owner absolute checkbook control over his or her IRA, avoiding the custodian fees associated with real estate expenses.
Finding the Right Custodian
The majority of custodians will not even offer you a self-directed IRA, so that decreases your search quite a bit. Of the potential custodians that are left, you should compare their fee structures and inquire after their advisory, or consultation, about services and any associated fees. You can begin your search with NAFEP. They can help you set up a self-directed IRA and can even provide a custodian for your account.
Written By Scott Janko, The National Association of Financial and Estate Planning (NAFEP)
For more details on the Self Directed IRA -ICOSM Click Here.