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Are you planning on buying real estate with IRA? If so, even though this may seem like should be an easy transaction to make, there are a wide variety of things you need to know before you get started with this process.

In this article, I’ll break down some of the things that you need to know regarding how to buy real estate with your IRA so that you will be more knowledgeable about the process works and have confidence when it comes to buying your property.

DIY Landlords

You Must Have A Self-Directed IRA

The first thing that you need to know before moving forward with buying real estate with an IRA is that your regular Ira won’t do, you have to have a self-directed IRA.

What is a self-directed IRA? It’s an individual retirement account that will allow you to purchase more than just stocks or bonds. This retirement account will allow you to buy real estate, precious metals, private equity and so much more.

Once you have a self-directed IRA set up, you’re also going to have to have a custodian, or qualified trustee, who will hold your IRA assets on your behalf.

What’s great about a self-directed IRA is that unlike a traditional IRA account, you can continue deferring taxes until retirement age, regardless of the level of returns.

Things To Know About Buying Real Estate With IRA

When using a self-directed IRA to purchase real estate, you need to know that the property is technically not owned by you, it’s owned by your self-directed Ira. This means that you absolutely cannot use that property for any personal or professional purposes, it has to be used strictly for rental purposes.

It’s also important for you to know that your wife or family members cannot stay in that multifamily rental property at all because this is what’s referred to as an ‘indirect benefit’. You do not want to break this rule because it means that you may find yourself having to pay taxes on this transaction.

Besides the rules regarding indirect benefits, another important thing that you must know is that the property you purchase must be uniquely titled. This means that any investment that you purchase through the IRA must be in the name of the IRA, and not you.

Any expenses that your property incurs when buying real estate with IRA are paid from the IRA and all income generated from the property must be put back into the IRA well.

Also, if this is the first multi-family property that you plan on purchasing, you need to know that when you utilize a self-directed IRA to purchase the property, you cannot claim any deductions from mortgage interest, depreciation, property taxes or other property-related expenses.

Buying The Property

When it comes time to purchasing a property with your self-directed IRA, you need to know that financing the property may be difficult because most mortgage lenders will require you to have a high balance inside your IRA.

Instead of attempting to finance the entire purchase of a multi-family property using your self-directed IRA, you should consider paying cash for a portion of that property and then financing the remaining balance. By doing this, you could take advantage of low-interest rates and stretch your buying power further.


Steps For Buying A Multifamily Property

Remember, when purchasing a multi-family property, utilizing your self-directed IRA, you still have to follow the same rules that you would follow when purchasing a property either with cash or financing.

Some of the things to consider when buying real estate with IRA include the following:


Multifamily properties are everywhere across the United States but, the reality is that even though most cities will have apartment complexes, that doesn’t mean that you should purchase properties there.

When considering a location for purchasing a multi-family property, pay close attention to things like unemployment statistics, the local jobs market, crime, school districts and what people are saying about the area online.

Once you identify a great location, the next thing that you should do is see what comparable properties in the area are renting for. If rents seem low, more people may be moving out of the area than moving in.

During the process of evaluating an area where you plan on buying a multi-family property, you should also verify some other things including if the city is walkable. This means that there are plenty of shops, stores, or things to do that can be easily reached on foot by your tenants.

You should also verify if the city has convenient access to the highway and if there is more than one method of public transportation there as well.

Tips For Searching For A Multifamily Property

As I’ve mentioned in previous posts, the deals are out there, and it’s possible to find multifamily properties across the United States using online tools like Bigger Pockets, realtor.com, Zillow, or possibly Craigslist.

If you don’t want to search for multi-family properties when buying real estate with IRA, consider hiring a local real estate agent. This step will help you to use your time more efficiently because, when properties become available, your agent will provide you with the list of those properties. All you have to do is go out and inspect them rather than spending your time searching for properties using the resources mentioned above or other time-tested methods like driving for dollars.

What To Do When You Find A Multifamily Property

Once you find a multi-family property that you’re interested in purchasing, the next thing to do is to visit that property in person, have it inspected, then do your due diligence. Determine the net operating income, look at the cap rates, then making sure that the potential income that you can earn from the property matches up to the income that the current owner claims they’re earning from the property.

Purchasing The Property

Last of all the most important is the exciting part when you are ready to purchase a multi-family property using your self-directed IRA.

To get started with this process, and initiate the investment, you will need to complete a direction of investment form. When filling out this form, you’ll notice that it has all the details about the investment including how much the property costs, where the funds should be sent etc.

After filling out the forms, your investment will be processed per the instructions in the DOI and your self-directed IRA is going to be the new owner of the multifamily property.

Final Tips

Remember, after purchasing a multi-family property using your self-directed IRA, you technically are not the owner of the property, your IRA is the owner, and you have to manage the property within your IRA.

Moving forward, once the property has been purchased by your self-directed IRA, the next thing that you should do is have a plan for the property and exit strategy.

Contact Trier Capital

In this article, I’ve given you a bird’s-eye view approach to buying real estate with IRA.

This is a great way to get started with owning multi-family properties but, it does come with a lot of work. There’s also the downside that you will not be able to enjoy the tax benefits that most investors enjoy when they purchase a multi-family property the traditional way either by financing or paying cash for that property.

If you don’t want to go through all the work involved with purchasing and managing a multi-family property yourself, the solution to the problem is to work with my company, Trier Capital.

At Trier Capital, we are a private equity firm that makes it easy for you to passively invest in lucrative apartment building syndications.

Finally, you can invest in tax-advantaged real estate without having to deal with the nuance or complication of purchasing and managing a property yourself.

Learn more about the benefits of working with us by calling (630) 229-2383 or click here to connect with us online.

Erik Hatch

Erik is currently invested in projects in Florida, Texas and Kentucky totaling $79 Million. He is an accomplished leader who motivates and inspires action while at the same time, is grounded in business metrics and information that drives successful businesses.