Invest IRA Funds in Naples Real Estate and Postpone Tax on Profits
You have IRA funds to invest and you are leery of the stock market, and yet don’t have the funds in your personal bank account to buy property outright? Don’t want to take on another mortgage? If you’ve got enough money in your IRA to cover the purchase of a home, you can buy a home and keep it in your IRA.
Here’s the deal: you are allowed by the IRS to invest IRA funds – money that you have stored in your IRA in buying real estate. These are called “checkbook IRAs” and they have been around for almost 20 years. Buyers are allowed to invest IRA funds but have to follow certain rules in order to make sure that the funds remain investment funds and aren’t co-mingled with other funds.
Under Section 408 of the IRC (Internal Revenue Code) you can put up to all of your funds that are in your IRA into real estate. The rules used to require the use of a custodian who charged for every action you took (and would cost a lot of money) and you couldn’t take direct control.
Now, ever since Swanson vs. Commissioner, the check book IRA was born and made IRA real estate purchases much easier. Basically, the IRA is set up as a self-directed account that is funded by your current retirement account. Then you’ll want to set up a limited liability company and your IRA will own the LLC entirely and solely. You transfer your money to the LLC and start looking for investment properties. The funds are held in a normal business account and you maintain control since you are the manager and you can sign contracts and write checks on the account. Rental income that you receive is tax deferred and there are no capital gains taxes when you sell an IRA owned property. The property has to be owned only by your IRA and not you individually and if you don’t have enough money to do it on your own, you can buy a property with others who are similarly situated and want to do the same with their IRA funds. Costs associated with the real estate must be paid directly out of the account and income from the real estate goes into the account as well.
You can’t buy your personal residence or buy from family members, can’t buy a vacation home for yourself or anyone in the family. You’re still not able to take money out until you’re 59 ½ without incurring penalties but if you’re not a fan of the stock market, it’s a great investment vehicle.
There are self-directed custodial companies that allow you to act as your own IRA broker and custodian which also would save you a lot of money in the long run.
Interested in finding out more about how you can invest in Naples real estate and make sure you own a piece of SW Florida real estate? We’ve got great ideas on helping you become a homeowner in one of the best places to live, just give us a call.
naples florida homes for sale, naples fl real estate, naples florida real estate for sale
