Real Estate Rules

One of the advantages of opening a self-directed IRA with Mountain West IRA is the ability to invest in real estate. Before considering this allowable investment, it is important to understand the rules to avoid making a tax or legal mistake.

Owning Real Estate

For over 30 years it has been legal to buy real estate with a self-directed IRA, something often misunderstood by many investors. In this situation, the real estate will actually be purchased with the IRA account as the owner rather than the individual person owning the real estate.

Do: Send authorization paperwork to Mountain West IRA two business days prior to funding, who will then release the funds for the real estate purchase. Mountain West IRA’s website has more details about real estate transactions.

Do Not: Take money out of the self-directed IRA to purchase the real estate. The withdrawal will be considered ordinary income and taxable as an IRA distribution.

Using Real Estate

Real estate purchased with an IRA should only be used as a tax-deferral and investment growth vehicle. Rental income, expenses, and gains related to the real estate should be deposited in the self-directed IRA account to defer the taxes.

Do: Use the property as a rental to provide rental income and capital growth.

Do Not: Personally use the property or allow disqualified people to use it.

Real estate is an investment that can be purchased with a self-directed IRA and then managed by yourself or a property manager. Many investors choose to hire a property management company to handle the day-to-day operations of the property making it a low maintenance investment during retirement.

Do you want to know more? Contact Mountain West IRA today.