Interest rates on IRAs plummeted during the economic downturn but for the most part, they’re back. I’ve never been sure whether or not it’s a good idea to pull funds out of an IRA for the purpose of investing elsewhere. Having said that, you’ve got to live somewhere and I’ve always been opposed to paying someone else’s mortgage or funding the landlords vacation so if I were currently renting, I would not hesitate to use my IRA to buy a home.
If you’re an investor there are additional considerations. Apparently there are IRAs that are specifically purposed for Real Estate Investing.
What’s your take on using an IRA to purchase Real Estate?
Your IRA Can Help You Invest in Real Estate
By Maria Patterson
While we think of IRAs as strictly for retirement, they can actually play a role in building wealth before reaching our golden years.
According to Jason Craig at the Entrust Group, you can use your retirement dollars to invest in real estate—even if you don’t have the full cash amount. Craig offers these three strategies for funding a real estate purchase even with a small IRA:
Partner the IRA
You can partner a self-directed IRA or Real Estate IRA with other IRAs, investors’ money, or personal funds. If partnering with just one other source still doesn’t provide the amount needed, try partnering with a group. The IRA would own a fraction of the investment and share the profits and expenses with other investors in that same proportion, says Craig.
Leverage the IRA
Your IRA can actually take a non-recourse loan to complete a real estate transaction in a self-directed IRA. A non-recourse loan is a loan in which you, as the IRA holder, are not personally liable for repayment nor guaranteeing the loan. Instead, the lender you work with will lend to your IRA, and will have no recourse against you or other assets in your IRA in the event of a default. According to Craig, the lender will only be able to recover the property and your equity in the property that has the loan.
Lend your IRA
You can also passively invest in real estate by providing capital from your IRA for a real estate transaction, says Craig. As the IRA owner, you determine the rate and terms of the loan to the investor, which is secured by the property.
For more information, Call or Text: 602-999-0952
Bill Salvatore / Arizona Elite Properties
Residential Sales, Marketing, and Property Management
Ever wonder what Closing Costs you’ll be responsible for when you buy or sell a home? Check out our infographic and article:
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Additional Helpful Information for Home Buyers
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