OVERVIEW
Investing in real estate for the purpose of growing retirement wealth or turning retirement savings into income is becoming more popular. Millennium Trust Company provides the highest level of administrative expertise as well as exceptional service to individuals wishing to self-direct a portion of their retirement funds into real estate.

REAL ESTATE RETIRMENT ACCOUNTS
Investors have access to a wide range of real real estate that can be held in self-directed retirement accounts, sometimes known as ‘Real Estate Retirement Accounts’. The type of real estate chosen is usually based on location, previous experience or cash flow analysis. Examples of real estate-related investments include:

  • Raw land
  • Multi-family units
  • Farms
  • Commercial property
  • Resort property
  • Pre-construction investments
  • Residential property
  • Private funds
  • Condominiums
  • Real estate development companies

Investors should always ‘do the math’ when considering an investment in real estate using retirement funds. The Internal Revenue Code requires that any expense related to a retirement-funded real estate investment must be paid directly by the retirement account. These expenses can include, but are not limited to, closing costs, real estate taxes, fees, insurance, utilities, maintenance, repairs and renovations. An investor must also determine the best investment approach: direct purchase of the real estate by the retirement account; as a tenant in common with other Millennium investors; or possibly leveraging the investment through a non-recourse loan.

LEARN THE RULES
When using retirement funds to invest in real estate it is critical that the investor understand the IRS rules and regulations to avoid prohibited transactions with disqualified persons that could lead to immediate distribution of the account with taxes and penalties incurred. A prohibited transaction is any improper use of the retirement account by the account owner, beneficiary or any disqualified person (spouse, ancestor, lineal descendent and any spouse of a lineal descendant). Examples of prohibited transactions include:

  • Selling real estate to it or using retirement account assets as security for a loan
  • Buying real estate for personal or certain family use
  • Providing “sweat equity” in connection with the renovation of real estate held in the retirement account

Investors should educate themselves by reviewing IRS Publication 590, Internal Revenue Code Section 4975, and consult with their advisors. 

BUILD A TEAM OF EXPERTS
When using retirement funds to invest in real estate, self-directed investors have learned the value of working with a team of professionals, each with their own specialty and value:

  • A financial advisor for investment and asset allocation
  • A CPA for tax, accounting, and IRS reporting requirements
  • An attorney for contractual issues
  • A realtor for investment property identification
  • A lender who alters non-recourse loans
  • A property manager to manage income-producing properties
  • A custodian to provide cost-effective custodial services

We are your ally in supporting a diversified multi-asset portfolio. We provide access to, and custody solutions for, alternative investments so you can take advantage of new and emerging opportunities with confidence.