Self Directed IRA Real Estate
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Funding Options
The type of property purchased within a self-directed IRA will often be determined by the funds available to the IRA owner, the type of property desired, and the conditions in a specific real estate market. Millennium Trust has the expertise to custody real estate in self-directed IRAs for investors using one of the following purchase methods:
- Direct ownership by the IRA;
- IRA financing the purchase with a non-recourse loan*;
- IRA holding a mortgage or deed of trust to the property;
- IRA holding a tax lien on the property;
- IRA investing in an entity established to hold real estate (real estate operating company)
It is important to understand investment objectives and timeframes and to ‘do the math first’ before deciding to use IRA funds to invest in real estate since all expenses related to the investment must come from IRA funds. Closing costs, taxes, insurance, association fees, repairs and renovation expenses must be paid from the IRA. Any use of personal funds, even with the intention of being reimbursed by the IRA, is prohibited and doing so may result in a total distribution of the investment and requirement to pay taxes and penalties on that distribution.
* Non-recourse lenders have their specific set of requirements and Unrelated Business Income Tax (UBIT) on the Unrelated Debt Financed Income (UDFI) should be discussed with your tax professional.
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