How to Use Self-directed IRA to Buy Real Estate?

How to Use Self-directed IRA to Buy Real Estate?


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So, you have started to save money for your retirement. You’re putting away some funds for the golden years. Many of you will have plans to travel the world or some of you might be thinking of starting a new business.

You can achieve both goals by putting your money into an IRA account. You’ll earn tax-deferred income. What you must do is to put money in your IRA and never take it out for personal expenses. The money will grow exponentially if you make some investments, but never take out this money for other reasons.

Once an IRA is created, it works as a separate entity. The account can independently invest funds and it can issue loans.

However, restrictions on your IRA don’t allow you to invest in everything. That’s why we’re suggesting to open a self-directed IRA account.

Putting your IRA funds into a self-directed account yield long-term benefits. It’s the best way to earn tax-deferred income for your retirement years. To create the account, you must hire a custodian. He’ll be responsible for asset management as well as filing tax documents.

Now you’re free to invest in real estate through your self-directed IRA account. In the same way, you can invest in stocks, bonds, mutual funds and CDs.

Rules to Invest IRAs In Real Estate

  • You cannot buy real estate for personal uses. It’s not possible to purchase a┬áproperty you already own. You must purchase a new investment property and transfer the title to your IRA account.
  • You cannot enjoy any indirect benefits from your IRA owned assets. That means you cannot rent yourself the new property. You cannot hire yourself or a family member to become a custodian for your IRA assets.
  • You must return the earnings to the IRA account. Consult your attorney otherwise, the authorities have the right to suspend your account.

Investing Money in Real Estate

Don’t put all eggs in one basket. You need to invest your money in different departments. Real estate investments are expensive because you need to pay at least 20% down payment. Like other people, you cannot get approved for the┬ámortgage. But, you can borrow the remaining 80% under your plan name.

Investing IRA In Private Money Lending

These two are the best options to invest IRA into real estate:

  1. Fix & Flip properties
  2. Private Money Lending

Both options are two sides of the same coin. Private money is the lifeblood of real estate industry. Have you ever wondered how investment companies pay cash?

Ever thought how these companies close the deal in 7 days?

This happens because of private money lending. Private money is a short-term loan. It’s a secured one and carries high-interest rates. Your saving account earns 4%-5%. But the private money can pay between 8%-18%. The loan is paid back in 6-36 months.

For fix& flip cases, you buy a property. Then you hire the managing investor to renovate the property. All the money comes from your pocket. Once rehabbed, the property is sold at a higher price. You earn the interest rate and profits on your invested amount.

Don’t go for this option unless you’re an experienced real estate agent. Try the safe route of private money lending. Although companies have their own requirements, you can still choose to invest as much or as little as you want.

When lending money, it’s important to have clear goals and a systematic approach toward your investment. Be careful of scams and laws regarding investments. You cannot lend money to every company. Try working with experienced investors or make them pay 5% of the total amount. The work record also indicates how successful a transaction can be. And at the end, make sure that you have a secure loan.

An Open Invitation to Join Himalayan Home Solutions

Would you like to invest with Himalayan Home Solutions?

We’re connected to the group of national investors. With the help of your money, we’re saving homes from foreclosure. Your money is used to rehab and sell properties throughout the New York. By working with us, you get a consistent return on your money. We are looking to expand our network of private money lenders because we have more exciting deals than we can spare.

You can contact us here to become a private money lender at Himalayan Home Solutions.

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