One of the advantages of a self-directed IRA is that it allows you more options in how you invest your funds. Among the choices available to you is real estate. While there are certain rules stipulated by the IRS, using your self-directed IRA account to invest in real estate offers you many benefits.
The Tax Benefits
If you have a self-directed traditional IRA, you can defer your taxes on the money your investment property earns. This means you won’t pay taxes on that income until you start receiving distributions from the account. Alternatively, earnings made through a self-directed Roth IRA will be tax free, which means you won’t have to pay any taxes on those earnings.
You Can Invest in Most Types of Real Estate
The IRS doesn’t dictate what kinds of real estate investments you can make with your self-directed IRA funds. You’ll be able to invest in residential rental properties, fix and flip opportunities, commercial real estate, or REIT funds. The choice is up to you, allowing you to pursue whichever types of investments seem the most profitable.
Sidestep the Probate Process
The rules that govern self-directed IRAS are intended to guard the assets from debt collectors. Any profits earned from your real estate investments will be protected, even after your death. This helps you leave a larger inheritance to your spouse and children.
More Resources Speed Up the Investing Process
There are new financial tools on the market that help people use their self-directed IRA funds more efficiently. Using these resources ensures you won’t miss out on good investment opportunities as a result of red tape. You can quickly pay down payments and bid on properties just as any other investor might do.
Opening a Self-Directed IRA is Easy
If you don’t already have this type of retirement account, it’s easy to open one. The easiest method is probably to rollover funds from your existing retirement account (401k, Roth IRA, etc) into a new self-directed IRA account. Alternatively, you can simply open a new self-directed IRA account with an initial deposit and arrange to begin making regular contributions into the account.
These are a few reasons that investing in real estate with your self-directed IRA can work for you. Before you get started, you should consult your financial advisor, or a tax attorney, to understand more about how the IRS regulates these types of investments. This will help you make wise choices in planning for your retirement.