Buying Real Estate with Self-directed IRAs:

There’s a significant gap between knowing you can buy real estate with a self-directed IRA or real estate IRA and knowing enough to actually do it. Most people who have gathered sufficient information about this tax-free option have already plunged into it. Others, though, are unsure about taking that first big step. They see the opportunity to significantly grow their retirement accounts through investments in property, tax liens, foreclosures, etc., yet they’re frozen in a “Should I or shouldn’t I?” stance, like a first-time bungee jumper holding up the rest of the line.

Naturally, when it comes to the possibility of using a chunk of one’s life savings, caution should be exercised. But it could be that many investors are simply hesitant to take the leap because they’ve heard about the complexities of self-directed IRA structures and they don’t feel confident in their own understanding of them.

Those of us in the retirement investment facilitation business (I work for Guidant Financial Group) have been, perhaps, too quick to point out the challenges of setting up these kinds of accounts. Yes, they are complex. And yes, you need to do due diligence with your IRA transactions. But maybe we’ve scared a few people off by implying that they, themselves, have to know and understand every minute detail of IRS, DOL and ERISA law before setting up self-directed IRA accounts. They don’t!

All the rollover, documentation and legal work can be done for investors via an account facilitator. And understanding the finer nuances of government prohibitions on IRS-purchases is best left to the professionals, anyway. A good and credible retirement account facilitator will explain to its clients in jargon-free language the options available and the ramifications of choosing various structures. It will do most of the legwork setting up the structure for its clients, so clients don’t have to jump through the hoops themselves.

The bottom line is: while investors should do their homework, if they utilize the services of a respected and experienced retirement account facilitator, they don’t have to be a self-directed account expert. While they may be waiting around to learn all there is to know about self-directed 401ks, those properties they’ve been eyeing certainly aren’t. They’re being scooped up by somebody else.

Here’s a great Frequently Asked Questions page on the Guidant website that provides some excellent details about self-directed IRA investing: http://www.guidantfinancial.com/resources/faq.aspx?sid=55af8bfe-097b-423c-a999-2a04ca9c840b

This article from RISMedia is an especially good one that covers most of the bases: http://www.rismedia.com/wp/2007-05-04/buildings-for-the-future-real-estate-can-add-another-level-to-retirement-account/


Wishing you success,
SFPetersen