Tax-advantaged earnings make self-directed IRAs an attractive funding source for real estate investments. Nowadays, using a self-directed IRA to purchase real estate is practically as easy and convenient as buying real estate with personal funds – though only IRA accounts provide real estate investors with unique tax advantages on their returns.
Some real estate investors may fear that managing an IRA-owned property is more complicated than owning real estate with personal funds. In reality, investing in real estate with your IRA is no more complicated than investing in in real estate with your personal funds. In a way, you can simply “copy and paste” your existing real estate team and investment experience into your IRA investment strategy.
If you have experience investing in or managing real estate, you can utilize that knowledge to the advantage of your retirement savings. You can also use the same trusted agents, property managers, and vendors that you’ve used in the past to purchase and/or manage your IRA real estate.
An IRA owner can manage their IRA owned real estate, as long as they don’t directly perform any maintenance or improvements on the property themselves (due to IRS rules). All physical tasks must be done by a vendor. In other words, the IRA property owner can pick the paint colors and design all the improvements, but they can’t hold the paintbrush and put the paint on the walls themselves. IRA property owners are prohibited from screwing in the lightbulbs in their properties, but they can decide who does.
If you’d prefer to be a more passive landlord to your IRA-owned real estate, you can hire a property manager to take care of the property for you. Investors can align their IRA property management experience with their personal level of comfort and experience as a property manager of prior real estate investments.
Whether you or someone else is the property manager of your IRA real estate, new paperless technological processes make it easier than ever for IRA investors to manage their real estate investments at the touch of a button. Online client portals allow self-directed IRA owners to manage transactions, see their account balance, and initiate transactions from their desktops or smartphones. Investors can even collect rent from tenants and have the money go directly into their IRAs.
Not all self-directed IRA providers are the same, so be sure to ask about the technological processes that are employed by each provider when comparing your choices. Innovative providers have fully-automated services that save their clients time and effort. To learn more about investing in real estate with your IRA, feel free to contact New Direction today.
This article was written exclusively for Rentometer by New Direction IRA