Self-directed retirement funds can be used to make investments such as in real estate; but of course, it is not that simple to do so since there are several IRA real estate investment rules that every account holder should follow and observe. If you are a self-directed IRA account holder, these rules are definitely something that you should seriously consider before making any investment decisions. And if you are quite uncertain or you feel that you need more information, there are tons of online IRA websites that you can visit or you can always consult with an IRA administrator, provider or custodian just to make sure that you will not be breaking any regulations.
7 Different IRA Real Estate Investment Rules and Regulations
- Your IRA cannot buy or acquire a property that you already own or those owned by people belonging to the disqualified person list. Based on the approved IRS rules, an IRA account holder is not entitled to make purchases on properties that they personally own and properties owned by those who are considered to be disqualified individuals. Now, according to the IRA real estate rules, disqualified persons are individuals or entities that are not authorized to participate in transactions or purchases related to the use of IRA funds. They are also not allowed to lease, lend or borrow money, acquire credit extensions, acquiring goods, services and facilities that would require the use of an IRA account.
- Disqualified persons are family members such as spouse, parents, grandparents, great-grandparents, children as well as their spouses, grand and great grandchildren, among others. IRA custodians, administrators, and IRA related service providers are also disqualified, along with corporations, partnerships, or LLCs which are at least 50% owned by fiduciaries.
- Your IRA investments are separate from your personal properties. The titles and certificates associated with the real estate property acquired through IRA will be placed under the name of the IRA, not the owner.
- Indirect Benefits are not allowed. So if you wish to purchase a vacation home in the Bahamas using your self directed IRA account funds, then you can forget about it. The rules governing the process of acquiring properties through real estate IRA strictly prohibits the purchase of properties that would indirectly benefit the account holder.
- Purchases, earnings, and value appreciation will and should directly go through the IRA account. An investment’s earning such as rent, payment or any form of income will be deposited to the IRA account and not to the account holder’s personal bank account.
These IRA real estate investment rules seem really simple to follow, but of course, there are still those who fail to abide by them. With the help of the right custodians or IRA experts, you will be able to understand what each rule is about.
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