Self Directed IRA - Holding Real Estate

[Robert Barney]

OK folks, I need some advice on this.

I am, of course, very worried about the devaluation of our currency. I am also very nervous about the stock markets.

I am interested if anyone has advice about setting up an IRA which allows you to hold real-estate. There seem to be two ways to go. First, you can hire a trust company to do it for you, and pay fees everytime someone sneezes. The second alternative seems to be the establishment of an LLC company, which you control and manage, which is then considered an IRA, and which you transfer IRA money in to and use the money to buy real estate.

I understand that you cannot personally benefit from the real estate in the IRA, or risk it being deregistered.

Does anyone have any experience with this stuff. I am especially interested in any IRS horror stories in regard to this strategy.

My goal is to own low cost, high acreage rural land for 10 to 20 years. I am not looking to make a killing, I just want to get a portion of my IRA out of paper and into land.

I look forward to your advice.

Bob Barney
Compulife

 

[STIBROKER]

how about a trust.........

 

[Robert Barney]

how about a trust.........

Sure. But who with? Anyone got any specific recommendations. Do any of you do this. Who do you do it with?

I'm a hot prospect here. I need details.

 

[somarco]

You need a self directed IRA administrator. It has been years since I have had anything to do with that market. Here are some suggested resources.

PENSCO Trust - Self Directed IRA | Self Directed Real Estate IRA: 866.818.4IRA

Self Directed IRA | Self Directed IRA LLC | IRA and 401K Business Financing

List of Self Directed IRA Custodians

 

[Full Throttle]

I've always wondered how these accounts deal with RMD's?

 

[Robert Barney]

I've always wondered how these accounts deal with RMD's?

I'm guessing that is pretty simple. You would take the total of all your accounts. For example.

Account 1. $250,000 of real estate
Account 2. $250,000 of cash

Total $500,000

You would need to distribute $500,000 divided by your life expectency, say 20 years.

$500,000 / 20 is $25,000

As long as you took $25,000 out of the $250,000 cash account, you shouldn't have to touch the realestate.

At some point, you would have to start selling or mortgaging the real estate to have cash for the RMD.

Did I guess wrong?

 

[VolAgent]

I'm guessing that is pretty simple. You would take the total of all your accounts. For example.

Account 1. $250,000 of real estate
Account 2. $250,000 of cash

Total $500,000

You would need to distribute $500,000 divided by your life expectency, say 20 years.

$500,000 / 20 is $25,000

As long as you took $25,000 out of the $250,000 cash account, you shouldn't have to touch the realestate.

At some point, you would have to start selling or mortgaging the real estate to have cash for the RMD.

Did I guess wrong?

Other than your percentages, you've got the idea. The IRS calculates a total RMD from all your qualified accounts. As long as it is met, they don't care where it comes from. The trick is when you have to start liquidating real estate to meet the RMDs. And the day will come, because the RMD is calculated to deplete the account right as your reach life expectancy.

 

[Full Throttle]

The trick is when you have to start liquidating real estate to meet the RMDs.

That's what I was getting at. When you have to start liquidating the real estate, it could get messy or at a minimum, it may not be a convenient time to sell.

 

[Robert Barney]

That's what I was getting at. When you have to start liquidating the real estate, it could get messy or at a minimum, it may not be a convenient time to sell.

Worst case scenario I could always put a mortgage on it - right?

 

[somarco]

I have a friend who set up some beach property in a self directed IRA. Can't recall if it was mortgaged or not but believe it was.

I think it was set up so he made the mortgage payments direct to the lender but that may not be right. He may have made payments to the trust and the trust remitted them to the lender.

I do know he rented the property out most of the year and had the rent payments made to the trustee. He also used the property from time to time and made rent payments to the trustee as well.

Probably have some of the details confused because this has been at least 15 years ago and I have lost touch with him since his wife died.

Any of the administrators above can provide details.