Real Estate Self Directed IRA

Given the demise of real estate prices in recent years and the potential for resurgence, it is surprising so little is known about Real Estate I.R.A.’s. With historically low prices in Southwest Florida coupled with the recent gains of the stock market, individuals may wish to consider moving a portion of their qualified retirement plans from Wall Street to the beaches of Florida through investing in real estate. Many Individuals are simply unaware how easy it is to transfer funds tax free from an existing retirement account into a Self Directed IRA. There are numerous facilitators we have worked with that our office can direct you to (see Penscotrust.com as well as theentrustgroup.com) to serve, among others, as Custodians for your Self Directed IRA.


With a few exceptions the process of purchasing real estate with your IRA is similar to purchasing other conventional investments with your IRA. Once your self-directed account has been established and funds transferred, simply instruct your custodian to purchase the specific investment property through a real estate letter of direction. Once received, the custodian will act on your instructions and remit funds to the real estate closing attorney you have selected to handle the transaction.

When purchasing Real Estate with your IRA, there are 4 main differences between buying Real Estate for yourself and your retirement account.

· Title: When purchasing an asset for your IRA it is imperative that it is properly titled in your IRAs name, listing the custodian, For the Benefit of (FBO) Your Name IRA.

· Funding: When purchasing an investment for your IRA, the funds required must come directly from your IRA. Accordingly, the custodian sends funds directly to our office per your instructions.


· Expenses/Profits: Any expenses or income associated with an IRA investment must be originated or remitted to your IRA.


· Signatures: Documents regarding IRA investments must be signed by the firm acting as custodian on behalf of your IRA.


While there is not a limit on the number of IRA accounts, the allowable annual contributions cannot exceed the applicable limits of the plan you have selected. Funds can be transferred from an existing IRA, 401k or 403b to a self directed IRA to the custodian for the purposes of purchasing real estate. You can elect to transfer all or a portion of your previous retirement funds to self direct them in investments. Retirement accounts among spouses may also be grouped together to purchase property.

When the property purchased through an IRA is ultimately sold the sales proceeds may be returned to the original IRA account or used to purchase another property.

This information was provided by Ronald Webster, attorney on Marco Island.