Diversification
A few years ago I decided to diversify my investment vehicle for my IRA. Did you know that your IRA can own real estate? My IRA purchased a cute condo in a great area of Lafayette and my IRA now experiences positive monthly returns instead of fluctuating returns with the stock market. Here's how it works...
1.) Set up a Self-Directed IRA - A regular IRA typically only allows you to invest in stocks, bonds, and mutual funds. To invest in real estate, you’ll need to set up a self-directed IRA. This was easily done through a third party company.
2.) Fund your Self-Directed IRA - Transfer money from your existing IRA or 401(k) into your new Self-Directed IRA.
3.) Once your Self-Directed IRA is funded, you can start looking for a property to buy. The property can be residential, commercial, land, or even rental property.
4.) Buy the property through your IRA - The Self-Directed IRA, not you personally, must be the buyer. This means the property title will be in the name of your IRA (e.g., “XYZ Trust Company FBO [Your Name] IRA”). All funds for the purchase, including the down payment and closing costs, must come from your IRA.
5.) Keep everything separate - All expenses for the property (like repairs, maintenance, insurance, property taxes) must be paid using money from your IRA. Likewise, all income (like rent) must go back into your IRA, not your personal bank account.
Of course, I consulted with my CPA to ensure this was in my best interest. I've helped a client of mine do the same thing and it worked so well for her that she is searching again for her next property to invest in.
Let me know how I can help you!
