Are you aware you can invest your IRA in real estate? Like many people you might have heard about this before but aren't quite certain how it can be done. I'll guide you through the easy three-step process and how it operates.

The interesting news is it’s easy and simple. Following this process allows you to assume control over your retirement account and invest in assets you need to make an investment in. Let’s walk through every one of the three steps one at a time.

STEP 1: You Want a Truly Self-Directed IRA

First, you'll need a self-directed IRA (SDIRA). If you were going to go down to your bank or brokerage and tell them you want a self-directed IRA they would doubtless tell you that is what you've got. Nonetheless their definition of self-directed means you can choose from a list of limited investment options that they charge fees or a commission on. If instead you ask whether you can take title to a specific property in your IRA, what will they tell you? „You can't do that“ or „you can’t do that here. “ Why? Because they can’t charge you a commission on the estate you buy so they just do not permit these sorts of investments.

What makes an IRA self-directed? The fast answer is, it depends wholly on the custodian or trust company who holds your IRA. Each IRA trustee is permitted to impose limitations on the sorts of investments they hold. Therefore , you need to choose a really self-directed IRA custodian, one that permits you to choose your own investments, whatever they might be. There are several really self-directed IRA custodians that we're employed with that aren't commission-based institutions like your bank or brokerage. A self-directed IRA custodian will typically charge an annual fee for the IRA service and doesn't extract fees or take any proportion of your profits. This affords you the freedom and adaptability to choose your own investments.

Most IRA custodians aren't self-directed so step one is to identify a truly self-directed IRA steward and open a SDIRA. After you have identified your new custodian, it only takes a few minutes to open a self-directed IRA account. Almost all of the process can be handled over the phone or on the web.

STEP 2: Deposit Money in Your New Self-Directed IRA

Next you deposit cash into your new self-directed IRA. You can do this 1 or 2 alternative ways. First, you can make a contribution. Contributions come from your earned revenue and you can simply take cash from your savings or checking account and deposit it into your new self-directed IRA. Second, if you have already started a retirement account through a prior employer you can move that cash into a SDIRA. You can „roll over“ an old 401 (k), 403 (b) or any other thrift savings plan (TSP) right into your new self-directed IRA. 3rd, if you've an IRA already, you can transfer assets or cash from an existing IRA at your bank or brokerage to your new self-directed IRA. When you do a rollover or transfer correctly, there are no taxes, penalties or charges associated with moving your money from one custodian to another.

Now you have a SDIRA set up and you have money in it, you are ready for the third and last step during the process to make your first property investment.

STEP 3: Make an Investment

This is the last step. You make an investment, in this situation, an estate investment. If this is your very first time purchasing real-estate in your IRA it is commonly judicious to contact your custodian first to ask what forms you are going to need to submit. Typically there is a „Direction to Invest“ form that you complete and teaches the custodian on what you are buying in your IRA, how much the investment will cost and where you've got to send funds for closing.

One of the most important things to remember is, „Who's going to own the estate“? Since you are using your SDIRA, it isn't you but your IRA who is buying the asset. when you write your offer to buy the patrons name should read as:

XYZ Trust Company FBO Your Name IRA, 12345

Your keeper will sign and process all of the recordable documents since it's the custodian essentially making the asset purchasing. Now your SDIRA owns the property. When your IRA owns the investment, all the expenses will be paid from your IRA. IRS rules don't enable you to pay expenses personally. Paying debts for your SDIRA investments is as easy as indoctrinating your custodian to do it. Regarding the revenue your SDIRA makes, here’s the best bit of all — all income and profits will return to your IRA, tax protected! No tax, no capital gains tax — no tax! By making an investment in a tax protected environment your wealth can grow exponentially faster than if you are paying taxes as you go.

By following these three easy steps, you may gain control over your retirement account and become an expert SDIRA real-estate investor in very little time.

Marco Santarelli is an investor, author andfounder of Norada Real Estate Investments — a nationwide real estateinvestment firm providing turnkey investment property in growth markets aroundthe United States. For more articles like How to Buy Real Estate with Your IRA, please visit our Real Estate Investing Blog where it was originally published.