A Self-Directed Individual Retirement Account (SDIRA) is an IRA that requires the account owner to make investment decisions and investments on behalf of the retirement plan. IRS regulations require that either a qualified trustee, or custodian hold the IRA assets on behalf of the IRA owner.

Self-directed IRA accounts are typically not limited to a select group of asset types (e.g., stocks, bonds, and mutual funds), and most self-directed IRA custodians will permit their clients to engage in the following: real estate, mortgages, franchises, partnerships, private equity and tax liens.

If your self directed IRA purchases real estate you should be aware of  the following:

1. You cannot use the property for a personal residence, second home or vacation home. This means your self directed IRA can hold raw land, rental properties, condos, commercial property, fixer-uppers and foreign property.

2. The IRA can buy debt-financed property but the debt must be non-recourse to the IRA and the IRA may have to pay UBIT (unrelated business income tax) on the profits from the debt-financed property.

The taxes are paid on the profits. Also, in reference to a debt- financed property, the owner of the self directed IRA is not and cannot guarantee the loan.

There are 4 ways to buy real estate in an IRA:
1. Wholesale property
2. Purchase an option on real estate
3. Purchase property
4. Be a partner with other IRA or non-IRA investors.

Contact your Montello Wealth Financial Consultant Your Montello Wealth Financial Consultant can assist you in understanding the Self Directed IRA.

Contact us for more information on Montello Wealth’s array of Retirement planning strategies.