Real Estate Investment Articles

Historically real estate has provided many investors with a stable investment vehicle that provides both income and appreciation. Very few Americans realize that they have the option to self direct their IRAs and other retirement plans into real estate. Most investors believe that their only IRA investment options are bank CDs or the stock market.

Step one is to find a custodian who will allow for a self-directed IRA account. A self-directed account is a requirement to have the ability to purchase real estate or other assets within your retirement account. Firms like Fiserv (www.fiserviss.com) specialize in assisting individuals in the rollover their existing retirement accounts into self-directed IRA accounts; ones that can be directed into a real estate purchase. Firms like Fiserv act as "Custodian" and make this process seamless from the investor's point of view.

There are no downsides other than the fact that there are certain types of transactions that are restricted through an IRA. These transactions include items that would produce UBTI (Unrelated Business Taxable Income) or have to do with "self dealing." These rules prohibit your IRA from making an investment into a property where you or your relatives have prior ownership or making an investment that produces income from any unrelated trade or business activity. The only two types of IRA investments that are absolutely prohibited-life insurance and collectibles.

As with any investment, there are no guarantees. However, most successful real estate investors feel that the investment risk associated with real estate is much less than that of investing solely in the stock market.

The process of purchasing real estate within your IRA is very similar to purchasing other conventional investments within your IRA, with a few exceptions. Once your account has been established and properly funded, clients instruct their custodian to purchase the specific investment property. To make the investment, a "Real Estate Direction of Investment" must be submitted to the custodian.

One thing to remember, self-directing an IRA is not significantly different than a non self-directed IRA. The return realized in your portfolio will be directly attributable to the choices you make, not by the choices of your investment professional. The major difference...you will be making them in a tax deferred/free environment.