How To Utilize Your IRA or other Retirement Account To Invest In Real Estate

by David Gerlitz on January 19, 2011

Many of our clients are curious how to use your IRA or other retirement account to fund real estate investments. You can make an investment in a Private Investment Offering, such as the ones we have available from time to time, using IRA or other retirement account funds. The investment stays inside your retirement account, so no early withdrawal penalty or tax penalty is created. This is done through a Self Directed IRA or other Self Directed retirement account. They are easy and inexpensive to set up and use.

Utilize IRA or Investment Account For Real Estate Investment
Self Directed Account Custodians

There are a number of retirement account custodian companies that offer this service. Please check with your investment adviser, or feel free to contact the Company for further information.

Retirement Account Types

There are several different types of retirement accounts, including Traditional IRA, Roth IRA, SEP/IRA, KEOGH & DBPP Plans. Each has different rules regarding tax deductible contribution limits and reporting requirements. Here – below – is a quick summary.

  • Traditional IRA -┬áTraditional IRA contributors can contribute and deduct up to a given amount each year. Deductible contribution amounts may be greater for those age 50 and over.
  • ROTH IRA -┬áContributions to a Roth IRA are not tax deductible. However unlike traditional IRAs future distributions from a ROTH IRA are not taxable. Both Traditional and Roth IRAs grow tax free.
  • SEP/IRA Plan (Simplified Employee Pension Plan IRA) – Contributors can contribute as much as 25% of their net pre-tax income to their SEP and deduct all it, up to a large maximum annual contribution limit.
  • KEOGH -┬áContributors (a Keogh plan and a Profit Sharing Plan are the same thing) can also contribute as much as 25% of their net pre-tax income to their Profit Sharing Plan and deduct all it, up to a large maximum annual contribution limit. Note: SEPs have largely replaced Keogh Plans because of lower administrative costs and easier reporting requirements, however both are still in use.

Defined Benefit Pension Plan (DBPP)

Contributors can put up to a VERY LARGE maximum annual limit, recently up to $165,000, into their retirement plan to reach their retirement income objectives. Please talk to your retirement plan custodian for more details and for current deductible limits.

Transferring a Retirement Account

Transfer of an existing IRA, SEP/IRA, 401K, Employer Pension Plan, DBPP or Keogh in order to invest in real estate is simple and easy. It just requires selecting a new retirement account custodian that allows Self-Directed investments, then filling out a few transfer forms.
To transfer ANY retirement account here is all you need:

  1. Copies of your existing retirement account statement(s)
  2. A new account set-up form to set up your new Self-Directed IRA, Sep/IRA, Keogh or DBPP
  3. A copy of the transfer form used by your new retirement account custodian.

Your new retirement account custodian will send the completed original transfer forms, once they get the signed originals from you, to your former retirement account custodians, who will then liquidate your holdings and send the money to your new retirement account custodian. Once the money is with your new custodian, you are free to invest it in a privately offered investment, such as the ones we have available from time to time.

Getting Started
Please call your investment adviser with any questions, or feel free to contact the Company for more information.

Tax laws and rules often change. Check with your investment adviser or tax professional.

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Loren Whitney July 5, 2011 at 3:01 pm

Hey David,

This is Loren Whitney at Entrust New Direction IRA down the road in Louisville, CO. I don’t think we’ve spoken before. I found you on Twitter today after searching for ‘Real Estate IRA’ and stumbled upon your blog article about purchasing real estate with your IRA. Nice article by the way. Have you heard of our local business before? We’re a local Colorado IRA Provider for assets like Real Estate. Feel free to give me a call at 303 546 7930, x103 if you’d like to talk or ask questions. You can also visit our website at Thanks!


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