Using Your IRA to Purchase Commercial Real Estate


ira_commercial_purchaseIt sounds too good to be true: As an IRA holder, you can use your retirement funds, prior to retirement age, to purchase commercial real estate as an investment inside your retirement account without incurring penalties or taxes. Depending on the account structure, you can even purchase these investments using a checkbook tied to your IRA funds.

Since 1974, IRA and 401(k) account holders have had the option to control the ways in which their retirement monies are invested, including real estate, tax liens and other alternative assets. Because the investment is made on behalf of the retirement account, just like the IRA investing in stocks and bonds, the acquisition is made without triggering a taxable event.

The stock market’s volatility has caused many people to closely examine their retirement funds and demand to know how they can take control and make their money grow faster.

Creating an account through which an IRA could purchase commercial real estate and other nontraditional investments is a daunting task. Fortunately, there are financial service companies that specialize in structuring these “self-directed IRA’s”. Once the program is created by an experienced provider and the client has been given means to self-direct their account investments, the client takes complete control from there and can invest retirement funds in a broad variety of assets.

With a slightly different structure, a self-directed IRA LLC or real estate IRA can provide a checkbook that can be used to make time sensitive investments on the spot. A self-directed IRA LLC structure lets you personally manage your commercial rental properties, make repairs and collect rent. These options can potentially save you a substantial amount of money in property management costs.

With a self-directed IRA, you assume the responsibility for ensuring that every investment is made with the IRA in mind. You are the “fiduciary” for the account and are required to avoid any prohibited transactions with disqualified persons that could create a conflict of interest.

Considering today’s economic climate, everyone, no matter what their age, should be concerned about the health of their retirement accounts. As with every investment decision, the more informed you are, the wiser your decision will be. Take the necessary time to be well informed about all of your investment options. What are your thoughts?

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