With a Self Directed IRA you can use your IRA money to buy income-producing Real Estate.
Buying Real Estate in IRA is Simple
Buying real estate in IRA can be as simple or as complex as you want it to be. Some investors simply buy a single house as a rental property. Others can take it to the next level by entering a partnership to build or purchase large buildings to be used for commercial purposes. However you want to do it, the most important requirement is to have the resources to invest.
Condos, family homes, or small apartment buildings are often the most popular choices among Self Directed IRA account holders. In certain areas, where the supply for such properties has not outweighed the demand, investors still have a good chance of earning a good return from rent payments or appreciation in the long run. After a long period of real estate disappointment, experts predict that the next few years will see the best purchasing opportunities.
In the golden days of real estate, a lot of people focused on short term purchases in residential areas, often called “Flips”. During this time, many Real Estate IRA plan participants have had an easy time growing their funds. However, that time has passed and these short term investments often returns profits only in the hands of true professionals. New investors need to be cautious with such purchases.
Land & Lots
Raw land and finished lots are often preferred by buy-and-hold investors. Although this is still a possible option, investors should proceed with caution and do their homework to hand pick only properties with the best potentials.
Purchasing raw land and lots are nothing similar to other locations where utilities are already installed. You should never assume that water, sewer or electricity will be easily available. Investors have to be sure that the land will meet the legal, geographical, geological, and environmental requirements for the type of buildings it is supposed to have.
Commercial properties can belong to hotels, service providers, retailers, wholesalers, and others. These types of buildings often offer higher rent payments than residential ones and therefore, are often seen as more profitable. On the other hand, the owners will only receive rent payments if the business is successful.
Therefore, the investors will need to know everything related to the business and the industry it is in, as well as finding out about the financial situation of the business owner. Investors can also seek help from commercial real estate specialists. Also keep in mind that the next few years will present a lot of great purchasing opportunities.
Usually, partnership is a great option to fund commercial properties because of their large sizes. Talk to us to further discuss this option.
Real Estate Options
For some people, buying real estate in IRA requires too much money, too much risk, and too much time and effort to manage it. Real estate options are a good alternative to earn some return without actually owning a property.
Having an “option” means you have the “exclusive right” to purchase the property. During the term specified in the option document, no one other than the option holder can buy or sell the property.
Most IRA investors look toward this choice to increase their return when the amounts of fund is limited. There are many comprehensive books and documents available on real estate options for new investors who want to learn more about this strategy.