Self-directed IRA for Real Estate


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What You Should Do:

  1. DO create a self-directed IRA to invest in permitted alternative assets for diversity in your portfolio, opportunity for tax-deferred wealth building, risk protection and for control over your retirement destiny.
  2. DO have an open mind about many different types of self-directed IRA investments, such as start-up businesses, notes and tax liens.
  3. DO work with the most skilled, professional administrator you can find, such as Capital IRA in the handling of your self-directed IRA.
  4. DO maximize contributions to your IRA, Roth IRA and any other employer-related retirement plan (especially those with a matching plan) each year to which you are eligible.
  5. DO learn everything you can about self-directed IRAs, and ask us as many questions as you can think of.
  6. DO consider combining your self-directed IRA with others to maximize purchasing power and returns.
  7. DO understand how to leverage your self-directed IRA real estate purchase with non-recourse loans.
  8. DO spread the word about the unlimited possibilities for wealth building using a self-directed IRA.
  9. DO make sure your IRA account has an adequate cushion for asset-related expenses.
  10. DO take an active role in planning for your future retirement through the use of a self-directed real estate IRA with Capital IRA.

What Not to Do

  1. DON”T purchase life insurance contracts or certain collectibles, such as coins, rugs, artwork or antiques with your IRA.
  2. DON’T use any asset your IRA owns personally (this also applies to certain family members and other disqualified persons).
  3. DON’T get involved in any transaction with your IRA that results in personal gain to you (this also includes certain family members and other disqualified persons).
  4. DON’T provide services to your IRA, other than minor administrative services.
  5. DON’T give a personal guarantee for a loan that your IRA obtains;
  6. DON’T do business directly with your IRA (this includes an entity in which you or certain family members and other disqualified persons own 50% or more of);
  7. DON’T take any income from assets owned by your IRA personally and DON’T pay any of the expenses of assets held by your IRA personally.
  8. DON’T take personal compensation for anything involving your IRA, such as services you provide to your IRA or transactions that your IRA participates in.
  9. DON’T try to get around a prohibited transaction by engaging in a transaction with your IRA and someone else’s IRA on a reciprocal type basis.
  10. DON'T co-invest personally with your IRA in any asset that you use as a collateral on a loan with your IRA.

Self-Directed IRA Checkbook Control

There are many companies that advertise “checkbook control” self-directed IRAs.  Capital IRA does not promote or advocate the use of this type of self-directed IRA, although in some cases an LLC (but not “checkbook control”) can be extremely useful for multiple investors and other situations.

Basically, self-directed IRAs that utilize “checkbook control” involve setting up an LLC for investing IRA funds.  The IRA owns some or all of the shares of the LLC.  The managing member of the LLC, which is usually the taxpayer, writes checks directly from the LLC for asset purchases by the IRA.  Proponents of this method of self-directed IRA investing emphasize reduced custodial and administrative fees and stress the added advantage of total control without the taxpayer having to comply with the guildelines of a custodian or administrator.

However, although most types of investments are permiited using IRA funds, the risk of creating a prohibited transaction using the “checkbook control” LLC approach is very high. It is very easy to inadvertently do something within the LLC that might disqualify the entire IRA. In addition to the potential for incurring penalties and additional taxes, a disqualification of your IRA would wipe out future tax and other benefits from having the IRA.  Other costs can be high, too.  Many firms charge a very high fee for LLC setup, and there will be future accounting, corporate and tax costs and fees associated with the LLC, along with recordkeeping requirements.  The other issue concerns whether the IRS will simply disqualify a checkbook IRA at some point.  Our company has determined that when the taxpayer controls the funds directly in the management of their IRA, an inherent conflict of interest has occurred.

Capital IRA has the unique knowledge and expertise to work with you through the myriad of rules and regulations that will keep your IRA intact as you proceed through the steps of controlling your own investments.  We also have unmatched legal, real estate, title, financial and tax experience, and have the unique ability to serve as a “one stop shop” for your self-directed IRA. 

This is not an area to involve yourself in a “do it yourself” project.  The costs and the risks are too high, and the benefits are ambigous at best.

If your proposed transaction would benefit from the use of an LLC, Capital IRA will let you know, and will guide you through the creation and use of the LLC properly and professionally at an extremely reasonable cost.

Self-directed IRA investing is best managed by experts who have devoted themselves to understanding and managing self-directed IRAs

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9 Reasons You Should Consider Placing Your IRA in Real Estate


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