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It’s no secret…  Investing your self directed IRA  in real estate can be a great diversifying asset for your IRA portfolio. Returns from your IRA real estate investments can help your IRA and retirement funds to weather downturns in paper assets, e.g. mutual funds and the like. But, if you choose to invest your self directed IRA funds in real estate, should you invest in commercial or residential real estate?

Arguments can be made for each. However, the smart way to determine which sector of the real estate market to invest in depends on several factors. As any savvy real estate investor will tell you, it all depends on your end goal.

Things to Consider When Deciding Whether to Invest in Commercial or Residential Real Estate with a Self Directed IRA

Location: Real estate is all about location, location, location. Most think in terms of residential real estate when referring to location. But, it is just as important in commercial real estate as well. For example, if you’re thinking of investing in a strip mall, location will be important because merchants must have sufficient traffic to be able to make sales.

Economy: Commercial real estate is more closely tied to what a given economy is doing that residential real estate is. If you’re going to invest your self directed IRA funds into commercial real estate, assess the local economy of the targeted region with a long-range view. For example, what are its prospects for recovery/downturn in the next three or five years. Then, you can make your investment accordingly.

Length of Investment: Piggybacking on the last point just above, using your self directed IRA funds to invest in real estate should be done with an eye toward the future. The big payoff in real estate is often received when you buy and hold. So, consider how long you’re willing to stick with a certain investment – and what is the likely payoff over that time.

The bottom line is, using your self directed IRA to invest in real estate is a smart move that can increase your retirement nest egg exponentially. However, as with any investment, it takes research and patience.

I would like to use the money in my IRA for the purpose of purchasing real estate, and I’ve been told I can do it with a self-directed IRA LLC account. Is it possible? The answer is, yes it is …

The IRA can contribute all the cash or a portion of its cash into an LLC wholly owned by the IRA. The transfer of your IRA money as initial capitalization of the LLC does not constitute a disqualified transaction or a taxable event!

Since the self directed IRA owns the IRA LLC or IRA Company, the IRA funds can be directed to the IRA Company in exchange for member units or shares of the LLC. After funding, both not only can traditional investments be made, but also alternative investments such as real estate including foreign real estate, discounted notes, gold coins, and bullion may be purchased by the IRA-LLC.

A Key Point to Consider When Buy Real Estate with an IRA Owned LLC

When owning real estate inside an IRA, all expenses must be paid by the funds in the IRA-LLC account. If you pay out-of-pocket for such expenses as contractors, appraisers, plumbers, taxes or landscapers, then you can open your IRA up to penalties, fees, and taxes starting at the beginning of the year in which you made the mistake.

Assets consolidated under the LLC become the sole asset of the account holder’s self-directed IRA. Once your IRA LLC has been funded, your IRA statement from the custodian will simply reflect one asset, i.e., the LLC. If structured properly, your IRA LLC should not pay any transactional, asset or holding fees, and why should you should it? After all, you are truly self directed and you are the one cutting the checks and paying the bills directly with your IRA checkbook.

The management of a self-directed IRA is a skill the investor can learn. Checkbook control of your IRA is something that every savvy investor should consider if they don’t want to be limited to just the run-of-the-mill investments.

In order to set up your IRA LLC feel free to call the IRA LLC Partner at (877) 339-4559. The IRA LLC Partner will guide you step by step. They will help you complete all the appropriate paperwork to manage the IRA transfer as well provide you with the training to guide you and set you on the course to investment success.

I studied the postcard closely, probably for the hundredth time. White stuccoed homes dotted the mountainside, their red tiled roofs gleaming in the afternoon sun. Mountains and hills rose up in indigo shadows in the distance. Beautiful. Idealic. If I peered through my magnifying glass, I could just make out dark dots which I knew to be purple clusters of grapes hanging from vertical rows of green vines.

This was to be my new home. Italy. I had never been there, yet here I was moving across the wide ocean to immerse myself in a culture I hadn’t a clue about and a language I didn’t speak or understand. I wondered for the millionth time if I was out of my mind…plum loco!

Fearing I’d find the answer if I dwelled on it for too long, I took a deliberate step forward. I contacted an international moving company. Then I decided to contact all the international moving companies in the Yellow Pages. This took some time and lots of concentration as I had to keep track of quotes that kept changing as the companies competed for my business. This was okay with me – kept me from thinking about whether or not I had lost my mind.

I checked my shortened list of international moving companies on the Better Business Bureau and finally, I made my selection. I set the date for two short weeks for them to come and pack my possessions into their barrels, crates and tea chests – in case I lost my nerve. I wouldn’t have time to chicken out in two weeks, would I? No…I’d be way too busy!

Turns out I wasn’t that busy. My international moving company agent was absolutely fabulous. She helped me plan my move and informed me of the papers I’d need. When she found out I had inherited an Italian vineyard estate from grandparents I’d never known, she’d gushed about how lucky I was, Italy was the most romantic country ever, and on and on till I was pretty much convinced I was doing the right thing.

My international moving company’s agent’s name is Lorenza. She has relatives in Italy that she visits every year. They live in a city close to my estate. Turns out she’s my age, 26 and single so we made arrangements to meet at my place in Italy in two months. We exchanged emails. Who knew I could actually meet such a great person of interest through an international moving company?

Her description of the mountains, castles, lakes, quaint villages, ocean and most of all, the friendly people, blew away the last remaining doubts that I had like morning mist in a breeze. All that remained was pure, unadulterated excitement!

International Moving

If you’re looking to make a sound investment with your self directed IRA LLC, then investing in real estate is a sound decision. Why? Because as a long-term investment, it means you can afford to wait out the ups and downs of any market for future gains. This is the number one key to real estate success. Some experts estimate that 97% of investors invest in traditional retirement options like stocks, bonds and mutual funds. Only 3% look toward nontraditional investments like real estate.

Real estate has is a time-tested investment that does well, particularly if you’re in it for the long haul. And, there are various investment options under the real estate umbrella to consider.

Several Options to Consider When Trying to Decide How to Invest in Real Estate with Your Self Directed IRA LLC or Checkbook IRA

Real estate can be a diversified investment. There is commercial property, residential property, raw land, mortgages and mortgage pools, trust deeds, etc. Following are three and why you may want to consider them in this economic climate.

Condominiums: Considering the current foreclosure rate, now is an optimum time to look towards condos as an investment with your self-directed IRA LLC. This is particularly true if you consider beachside communities for possible vacation rentals. Once the market makes a return to good times, you’ll be ideally situated to capitalize.

Undeveloped Raw Land: You can use your self-directed IRA LLC/checkbook IRA to purchase raw land. Many areas that have suffered from natural disasters like hurricanes and tornadoes may have particularly good deals on raw land, which can later be sold to developers for residential or commercial real estate development.

Invest in Commercial Real Estate: While the US economy has not reached the formal recession status, the general feeling is that the US economy is slumping. This has a negative, trickle down effect on business. Many close or look to restructure. All of these factors can add up to great investment opportunities for future gain.