Momentum - Business to Business Online Magazine MOMENTUM January 2020 | Page 12

INDUSTRY SPOTLIGHT - REAL ESTATE
JAMES BROCKWAY
Broker, CPA
Brockway Commercial
281-684-6482 | www.brockwaycommercial.com
Have You Considered
Using a Self-Directed IRA
to Invest in Real Estate?
I
t seems that everyone has a 401k with their
employer or an IRA with a company such as
Fidelity or Charles Shwab. While these are
important financial vehicles that allow you
to invest in the stock market, there’s another
valuable option that you can choose, that allows you to
make direct investments in real estate from your IRA.
This option is known as a “Self-Directed IRA”.
Through a company that offers such products, you
can move money from your existing IRA with Shwab,
Fidelity, etc. and place it with the Self-Directed IRA
company (the “Company”) and from the account
you set up with them you can buy real estate and
investments in real estate partnerships. You are also
allowed to buy commodities such as gold and other
valuables. Having this option can let you tap into
investments that aren’t allowable under the normal IRA
rules and gives you critical diversity of assets.
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Here’s how it works. Say you would like to invest
$25,000 into a partnership that is buying a shopping
center. You would contact your Company, give
them some documents from the manager of the
partnership for them to review, such as the Private
Placement Memorandum or other literature, and fill
out a few forms. The Company will then wire funds
to the partnership and “voila” you are done. The only
thing unique about your investment is the name on
your account with the partnership. Instead of John
Smith, your ownership will be named something like
“American Trust Services, for the benefit of John Smith”.
One other minor item is that the general partner of the
partnership is required at the end of each year to sign
a statement from the Company estimating the value of
your investment for their records.
Other than the above, a Self-Directed IRA works a lot
like a regular IRA. You receive a monthly or quarterly
statement, funds get invested out of the account and
distributions from your investment get distributed back
into this account and all other tax rules apply as in a
regular IRA. Be careful, though, there are prohibited
transactions like buying a townhome and renting it
back to yourself. This is not allowable by the IRS, since
the IRS doesn’t allow you to receive indirect benefit
from these investments.
A few of the
more popular
Self-Directed
IRA companies
are Equity
Trust, IRA
Services Trust
Company
and Quest
IRA. Contact
one of these
or one of the
other many
companies
out their for
guidance.