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Buying real estate with retirement funds

Buying real estate with retirement funds:

Did you know that it is possible to purchase real estate with your IRA?

Recently, there has been many articles posted about Grand Rapids being an amazing place to own rental property. This is due to the increasing rents and affordable real estate. These articles are convincing and you may have been considering getting into the game yourself! I am a huge fan of investment real estate as a vehicle to reach many goals such as long term appreciation and short term cash flow.

You may not have been aware that you can use the funds in your retirement account by using what they call a “self-directed IRA” to buy investment properties. The basic concept is that instead of using retirement funds to buy stocks, bonds and mutual funds and have those investments grow to provide for your retirement, you use the money from your retirement account to invest in real estate. This is very possible to do, but must be done very carefully and with a provider that is set up to handle it correctly so that you don’t endanger your tax protected status.

The Rules:
1) The IRA owns the real estate and must benefit from it – not you. You can’t use it for your primary residence or a vacation home.
2) You can never personally touch the money. The money to purchase the property must come from your IRA and any proceeds must go into the IRA.
3) Although there are ways to manage the property yourself, it is must simpler to use a property management if you are holding the real estate for rental purposes. All monies must be made out the the IRA, never to your name personally.

The Benefits:
1) The benefits differ depending on if you use a traditional IRA or a Roth IRA, but with either there are all the benefits of tax deferral that you enjoy with the more common mutual fund investments.
2) Control. Often the returns that real estate experiences exceeds that of other investments if managed properly. Managed properly being what I want to emphasize here. You can choose the home, the tenants, the improvements, and many other decisions to make sure that your asset is performing to your expectations in a way that you aren’t able to do with stocks and bonds.

To Sum Up:

To find out more, please give our office a call. We would love to talk to you about if this would be the right avenue for you to become a real estate investor!


Office: 616.363.7788
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