- INDUSTRY NEWS -
INDIVIDUAL RETIREMENT ACCOUNTS (IRA’S)
AN UNTAPPED RESOURCE
TO BUY REAL ESTATE
BY R ANDY JUST
Many folks are familiar with IRA’s in the respect that the Internal
Revenue Service (IRS) allows for a certain amount of money to be
saved via a tax deferred account on an annual basis. The typical
investment for an IRA account is stocks, bonds and/or mutual funds.
Two undesirable aspects of these types of investments is volatility and
low returns. In addition, most financial advisors suggest a diversified
portfolio. One way to further diversify one’s retirement portfolio is to
add Real Estate investments.
So how does one go about doing this
through an IRA account? The key to
making it a reality is to set-up what
is called a Self-Directed Individual
Retirement Account. There are a
handful of national companies such as
Polycomp, Entrust and Pensco that will
set-up the account per IRS guidelines.
Once the account is set-up, you will be
provided with a name that will be used
to write offers and in which the property
will be held. For example, the account
name assigned will be similar to “01 The
Entrust Group Inc. FBO Mary A Smith
SEP IRA #55-00123”. IRS regulations
require that a qualified trustee, or
custodian, hold IRA assets on behalf of
the IRA owner.
The IRS has a number of rules when it
comes to self-directed IRA accounts. A
summarized version of the rules is as
follows: You need to treat the retirement
account as a separate entity and it is
imperative your personal funds are
not comingled with your retirement
funds. The concept of “an arm’s length
transaction” is very applicable. For
example, when a Real Estate contract
is accepted, an Earnest Money
Deposit (EMD) is often required to be
SELECT LIVING
- 53 -
2016 EDITION - ISSUE 1