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We’re told time and again not to touch our retirement money, to let it grow bigger and bigger like Jessica Simpson (damn, that’s one big-as-a-house pregnant woman!). But what if tapping into your IRA to invest in real estate can make you big bucks now? I say “go for it”.

Lots of Americans are renting, because they’re not one of the few elite chosen by the bank to receive a mortgage. In turn, tangible assets like real estate continue to raise the eyebrows of value investors. So what does this mean to you? You can use your self-directed IRA to purchase and manage a property, and in the end, you’ll actually replenish your retirement money with the rent you collect on that property. Tax FREE!

So what do you have to do and what rules do you need to follow to get the show on the road? Here’s the 30,000 foot view to wet your whistle.

TRUST COMPANIES

  1. Find a house that’s undervalued in a neighborhood that’s attractive to renters or one that you can flip. There’s lots of ways to find bargain house, but consult with Freddie Mac and Fannie Mae who are offering programs to sell their foreclosed properties (some already with renters) to investors who want to manage properties. Alternately (and this is even sweeter), you can simply lend to another investor, like me. I find the property, I do all the work, and I pay you a fat interest fee on your money – you quite simply get to sit back and play Mr. Banker with your IRA funds. Ok, so its a little more complicated that that, but my investors love me because they know I have tons of experience, I buy super cheap, and I always have massive cushions built in to my deals so that if something goes wrong, their money is still safe and protected.
  2. Don’t even think about taking a loan on that traditional IRA. How about directing the money yourself in what’s called a Self directed IRA or Self Directed Roth IRA Find a government-designated custodian (broker-dealer, or trust company) to hold your IRA. These are firms like IRA Resources, Equity Trust, Guidant Financial Corp, En trust, Security Trust etc… But be prepared to be raped…just a little bit (it will only hurt for a second), as these comapnies generally charge fairly high fees to set up your account, or to do transactions from your new self-directed IRA account.
  3. Remember rentals have to be just that…rentals. You can’t live in, vacation in it, throw Kid n’ Play house parties in it, and you can’t buy the property from family members (not that you’d want to). And, if you decide to “be the bank,” and lend guys like me money – you have to “be the bank,” only – you can not be a partner in the deal. Oh, sure you’re IRA will hold title to the property, but our friends at the IRA say we can not be partners.
  4. There are as you can imagine a TON of rules (its not really your money until Uncle Sam says its your money). Don’t f— around with how you play the game; hire a rockstar tax lawyer and accountant or get advice from your self-directed custodial company. They generally are pretty lawyered-up (you’d be too if you dealth with the US Gov for a living) and can tell you what you can and can’t do with your the money in your self directed IRA.

At first glance, it may seem that jabbing a fork in your eye or getting a colonoscopy from Dr. Lovealottabutt would be a more pleasant experience, but chin up; there are advantages to using IRA’s to fund real estate. You know you’re a control freak, and now you can put that annoying, relationship-slaying…uh, I mean sparkling, charming quality to good use. Take control of your retirement destiny. All the capital gains and income tax is deferred, which is like giving your investment dollars Viagra (shwing, shwing). Now’s the time to invest your money in real estate; why not use your IRA to get in the game?

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