Tips on Buying Real Estate with your IRA in Fort Myers – Core Real Estate Solutions

While most people understand that real estate is an investment, many people are taking advantage of the qualified retirement accounts to purchase real estate as an appreciating or revenue-generating instrument like IRAs.

Understanding the tax implications, legal ramifications, and various intricacies associated with purchasing real estate in Fort Myers within your Individual Retirement Account (IRA) is of utmost importance.

So, let’s dive into some tips on buying real estate with your IRA in Fort Myers FLORIDA!

Tips on Buying Real Estate With Your IRA in Fort Myers

If you don’t have a self-directed type IRA… first off… you’ll need to connect with your trusted financial advisor to find a reputable and low fee self-directed IRA. Or, connect with us and we can direct you to some very good self-directed IRA companies we’ve worked with in the past.

Open a Self-Directed IRA

The initial step in acquiring investment properties in Fort Myers within your IRA involves establishing a “self-directed” IRA. This can be accomplished by consulting with a qualified financial advisor or another trusted fiduciary who can act as the IRA custodian. Opting for a fee-only financial advisor can facilitate the account setup with minimal hassle. In contrast, a commission-based financial advisor may dissuade you from purchasing tangible assets within your IRA, as their earnings from the investment would be limited.

Types of Properties You Can Buy With Your IRA and Rules

You can own a wide variety of properties within your IRA, including residential, commercial, and industrial structures, as well as unused land. Many savvy investors choose to purchase parking lots, storage unit facilities, and other types of property that require little maintenance but generate steady income.

Your IRA cannot own any home where you live or vacation. Legally, you aren’t even allowed to spend one night in the property. You cannot avoid this restriction by “renting” the property from your IRA, or renting to your spouse, children, grandchildren, parents, or grandparents, nor can you use an IRA to purchase a property from close family. You could, however, rent property to a sibling, cousin, or friend. A solution that many investors implement is to purchase a home for their IRA, rent it out for income until retirement, then assume residence upon retirement.

How Does Income Work With Real Estate In An IRA?

It’s crucial to note that the income generated in your IRA cannot be utilized for your “personal current benefit.” This stipulates that any income produced by the property must stay within the IRA until your retirement. In the event of selling the property, all profits must be retained within the IRA. Additionally, expenses such as property taxes, insurance, improvements, and other associated costs must be covered by the IRA. Failure to adhere to these regulations could lead to the disqualification of your IRA, making you liable for income taxes on the entire property value, along with a 10% early distribution penalty.

It’s important the all distribution rules associated with an IRA (or Roth IRA) including taxation, required minimum distributions, beneficiaries, and other factors do not change when using a self-directed IRA to purchase a property. There can be a huge upside to real estate in your IRA, but it’s best to know exactly what’s in store.

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