What to Know About How Self-Directed IRAs Can Be Used to Invest in Real Estate
Self-directed IRAs, unlike the traditional kind, can open up the possibility of buying real estate directly for individual investors.
October 29, 2020 | Patricia Kirk | National Real Estate Investor
In an era when retirement pensions are practically non-existent, tax-deferred Individual Retirement Arrangements (IRAs) provide workers with a way to save for their retirement years. But in today’s uncertain economy, individuals concerned by the stock market’s volatility can gain greater control over their retirement funds by opening a self-directed IRA (SDIRA). One of the advantages of an SDIRA is that it provides access to alternative investment opportunities, including income-producing real estate.
However, using an SDIRA to purchase rental properties can be complicated to those who are newcomers to the sector, which is why investors likely need to use a real estate IRA custodian to help them understand the tax code governing this type of investment and guide them through the investment process to avoid unexpected penalties and reap all of the available benefits.
To gain an understanding of how SDIRAs work when investing in real estate, NREI asked Meg O’Connor Zwick, a senior vice president and director of client services at Millennium Trust Company who specializes in directed-custodian services for IRA investments, to share her knowledge about this investment option. In the following Q&A, she explains how an SDIRA works, its advantages, challenges and unique rules that apply to investing IRA funds in in non-standardized, alternative investment like real estate.
