At Cornerstone Commercial Investments, we understand the allure of real estate and its potential for substantial returns. However, the challenge for many is finding the capital to start. What if we told you that the capital you need might already be available? Many people are unaware that they can use their Individual Retirement Account (IRA) to invest in real estate. This opportunity could be the game-changer you’ve been searching for to diversify your portfolio and build wealth for your retirement.
Investing Your IRA in Real Estate
When thinking about IRAs, the usual suspects come to mind: stocks, bonds, mutual funds, or exchange-traded funds (ETFs). Yet, under certain conditions, IRAs can hold real estate investments. This can include single-family or multiplex homes, apartment buildings, commercial properties like retail stores, hotels, office complexes, raw land and lots, and even boat slips.
Is an IRA Real Estate Investment Right for You?
Here are some considerations to determine if this is the right move for you:
- Self-Directed IRA: Your IRA must be self-directed. This type of IRA allows for alternative investments, unlike traditional IRAs offered by most brokerage firms.
- Custodian Requirement: You will need a custodian who specializes in self-directed accounts to manage the transactions and paperwork and ensure compliance with IRS regulations.
- Separate Entities: Your IRA and you are separate entities. The IRA owns the property, not you. The title to the property will be under the custodian’s name for the benefit of (FBO) your IRA.
- Investment-Only Property: The property must be purely for investment. You cannot use it as a personal residence, a vacation home, or an office for your business. These restrictions also apply to people the IRS deems “disqualified,” such as family members and certain business partners.
Benefits of Investing with Your IRA
On the bright side, investing in real estate through your IRA comes with several advantages:
- Portfolio Diversification: Real estate can diversify your investment portfolio, often moving counter to financial markets.
- Appreciation: Real estate historically appreciates over time, making it a good fit for an IRA’s long-term investment horizon.
- Income Stream: Real estate can potentially provide a steady income stream from rents, with rental income growing tax-free within the IRA.
- Tax Advantages: Any profits from real estate investments grow tax-deferred within a traditional IRA or tax-free in a Roth IRA.
- Real Property is Real: Unlike traditional IRA investments in stocks or bonds, your investment is in a tangible asset you can see and touch: real estate.
- Control Over Investments: You have the ability to buy, sell, flip, and accumulate properties, giving you more control over your investment strategy.
Things to Keep in Mind
While the benefits are compelling, there are essential considerations to keep in mind:
- Funding Restrictions: All expenses, including maintenance and property management, must be paid from your IRA. You cannot pay for these costs out of pocket.
- Complexity: The process can be complex, requiring strict adherence to IRS rules to avoid penalties.
- Liquidity: Real estate is less liquid than stocks or bonds. Selling a property to meet IRA distribution requirements can take time.
How Cornerstone Commercial Investments Can Help
At Cornerstone Commercial Investments, we specialize in helping investors navigate the complexities of using their IRAs for real estate investments. We provide comprehensive support, from finding suitable properties to connection you with experts who can manage your IRA-related transactions to ensure compliance with all relevant regulations. We can assist in helping you unlock the potential of your IRA, paving the way for a lucrative and secure retirement.
Using your IRA to invest in real estate isn’t the best move for everyone, but under the right circumstances, it could be an excellent strategy for building wealth. To explore this opportunity further, visit our website or contact us today at Cornerstone Commercial Investments. We’re here to help you realize your investment goals.