Buying Real Estate Through IRA Funds

Bad memories of the bear market and frustration over low rates of return have many investors looking to purchase real estate from their retirement savings. Many investors are using their retirement funds from IRAs to buy real estate.

Yes it’s true. You can buy real estate property through funds in your IRA but you need to know the transaction is very complex and not as easy as you might think. The numerous rules and the likely hood of miss-handling the transaction can disqualify your tax-deferred status and force you to pay tax on its full value plus penalties. If you want to invest in real estate in your IRA you need to exercise caution and find the proper guidance with a real estate broker and investment counselor.

Owning property inside an IRA forgoes the traditional tax advantages of investing in real estate. You can’t deduct property taxes or mortgage interest, and you can’t use depreciation. When you sell the property, a traditional IRA turns profit into ordinary income rather than capital gains. Also, your IRA must have enough spare cash to pay such property-related expenses as maintenance costs, taxes and management fees because all income must flow into the IRA and all expenses be paid out of it.

1. You need to identify a property you want.
2. Next you have to find an IRA custodian that allows real estate investments. There are only a few IRA custodians who can handle this transaction nationwide. Your local bank or lender will not be qualified to do this.

An example is taking money from your IRA and using it to purchase a single-family home. Let’s say you have to spend $15,000 to remodel the house and then decide to sell it within a year for a $20,000 profit. The remodeling costs came out of your IRA and the profit on the sale of the property goes back in along with the principle withdrawal. In another case a buyer used $50,000 in an IRA as a down payment on a six-unit apartment complex. The rental income flows back into the IRA. Because the investment was an apartment building or commercial space, you’ll need to hire a property manager to collect rents and maintain the building. Depending on the IRA custodian, you may have to pay a transaction fee every time you authorize a check to pay a plumber or your property taxes.

This touches on just a few of the many scenarios that can apply to purchasing real estate through and IRA. These types of transactions are possible but very complex. Do not rush into this process without the property guidance from qualified professionals.

Check out the link at Money Central for more detail information.

posted by Bill Desautels P: (802) 655-9100 (800) 639-4520 x217 F: (802) 655-0400 E: condoguy@condoguy.com The Condo Guy – Vermont condo real estate The Condo Guy has been providing advice to buyers and sellers of Vermont condos real estate for nearly 30 years.

When The Condo Guy blew out the candles on his birthday cake the smoke detectors in the restaurant went off. Happy 50th

Working on my beach access, I will be boating in the spring. After 7 years here, it’s time!

Spike in Home and Condo Sales

Home buyers signed more sales contracts in August than in any month this year. Much of the boost in home sales came from the approaching deadline of the homebuyers’ tax credit. Many regional housing markets have gained some ground recently as the tax credit for first-time homebuyers stimulated sales of starter homes and condos.

Pending home real estate sales are considered a positive indicator of the health of the housing market. With pending sales the resulting property closings are experienced in October and November. With this trend the housing market gains provides fuel to the recovery of the housing market and general national economy.
As many first-time home buyers rush to beat the deadline for the $8,000 tax credit, which expires at the end of November many home buyers are continuing to have problems obtaining mortgages that may push real estate transactions beyond the November 30th deadline. The rise in pending home sales shows that buyers are returning to the housing market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and foreclosures.

As many news networks report on the status of the extension of the tax credit for first-time homebuyers, it’s hard to guess whether Congress will extend the tax credit. With any luck buyers and sellers will get a reprieve from Congress with an extension and possibly and expansion to all home buyers. This would be the ultimate boost for the housing industry and an early gift to many home buyers this upcoming holiday season.

posted by Bill Desautels P: (802) 655-9100 (800) 639-4520 x217 F: (802) 655-0400 E: condoguy@condoguy.com The Condo Guy – Vermont condo real estate The Condo Guy has been providing advice to buyers and sellers of Vermont condos real estate for nearly 30 years.

Tonight my 7 brothers and sisters are taking me to dinner at The Bearded Frog as an early 50th celebration, can’t wait, food is so good there.

What a week, 9 closings, seems like the old days. My team has pulled together, stayed focused and even smiles through the challenges. Thank you.

The flu suddenly feels too real, one of my sweet clients whom is 5 months pregnant just learned she now has it. Holding her in my thoughts.

As winter approaches I need reminders why I live in Vermont, as I drove out of my driveway 10 deer crossed in front of me, that beauty is why

Dripping water discolors sinks and suggests to the buyer that the plumbing may be faulty or worn out. Repair or replace faucets and plumbing.

Driving to Stowe this morning for a closing and my life has been threatened if I do not bring back Cold Hollow cider donuts. Now I know my worth