If you have a bit of business experience in the real estate industry, you know that it is not possible to make a profit on land and residences without paying a large portion in the name of the profit. You can find many shady characters who will offer to circumvent loopholes in IRS regulations or tempt you into looking for other schemes that can eventually catch you and you would end up paying a fine or even jail.
A self-directed IRA is probably the only legal way you can reap the benefits of a healthy housing market. That’s right, you can make tax-deferred investments in land and residences. But of course, there is no such thing as a free lunch. The only drawback here is that you could use the money generated from the investments only after the age of 59 and a half.
The self-directed IRA is one of the most efficient and secure ways to put yourself at ease in post-retirement life. Even better news is that you won’t be limited to investing only in real estate with your self-directed IRA retirement account. In fact, unlike more traditional retirement plans, including the 401k, you can invest in just about anything you want. The IRS applies some restrictions, such as alcohol and collectibles. You should take a look at this list just to be sure before you go on an investing spree.
If you feel the need to withdraw your earnings from your Self-Directed IRA before you turn 59½, you’ll have to pay taxes on that amount, plus a small penalty. You can get the best value for your investment only when you reach that age. When you have all the money at your disposal, you will have too much to handle. You can buy that house by the sea to live your golden years or even go on a vacation that you planned with your partner all your life.
In addition to being able to invest in different types of non-traditional assets tax-free, there are many other advantages to starting a self-directed IRA. You can keep your checkbook in your own pocket, which means you can make investments whenever you want without the need to contact your custodian or broker to have your transactions approved. As a result, you would also not have to pay any transaction fees.
Remember that you must verify that the company or broker to whom you are entrusting your money is qualified for this job. The best way to do this is to contact the authorities that handle these matters in your state. Do not get carried away by your instincts because it is better to be safe than sorry.