Invest in Real Estate using your IRA/401K-SDIRA

SDIRA enables you to invest your retirement benefits or other savings in assets that produce higher yields such as real estate, mortgages, and notes, among others as stated in the IRA Publication 590. Some retirement and savings plans may not permit IRA real estate investments. Therefore, contact your administrator and ask them to roll over your IRA into a tax-free IRA whose proceeds you can use to invest. You may use any of the following retirement plans to invest in real estate using SDIRA or 401K.

• Simple IRA
• SEP IRA
• Roth IRA/401K
• Traditional IRA/401K

However, there are some rules.

• ¨Both the seller and buyer act in self-interest without influence from other external parties.
• ¨The investor does not receive direct benefits. All the proceeds go to IRA first.
• ¨You cannot trade with a disqualified individual. These include your relatives, spouse(s), or yourself.
• ¨You can only manage the property, not live in it or use it for self-interests.
• ¨To attract the least tax, deal exclusively with your IRA account when purchasing, selling, and receiving all proceeds from your investment.
• ¨If you opt for a non-recourse loan in conjunction with your SDIRA or 401K, invest in multifamily apartments to get the best financing options.

These restrictions say something about investing in real estate using your IRA/104K SDIRA. It is very profitable. It is like putting away some money for future use, which gains value, and using it to give you more profits as you save it. Furthermore, the returns are tax-free, provided you follow the restrictions.

Compare the following examples:

• a)A savings plan in a high-yield savings account where the interest attracts top-rate tax.
• b)A retirement plan that earns you tax-free or tax-deferred profits, real estate property, and retirement benefits in the end.

In the second option, the profits are higher and attract less tax. It’s all about growing your wealth, not sharing it with the taxman!

Lastly, never risk everything on one endeavor. As you invest in real estate using your IRA, diversify your portfolio as much as possible to reduce your risks. A real estate manager would advise you on the best options to pursue.