January 11th, 2018 By James Soletti in Blog.
My wife, Ricki, was interested in using the cash in her self-directed IRA to invest in real estate. She didn’t have enough in her retirement account to cover the purchase of the single family home she wanted, but it turns out that didn’t hold her back. We were able to combine the cash in our self-directed IRAs to cover the price. Partnering on self-directed investments is possible, as detailed in IRS Publication 590. When partnering two or more funding sources, any expenses (insurance, property taxes and repairs for example) have to be paid from the funding sources in the same proportion as the purchase. Likewise, any profits flow back to each funding source in the same percentages. In our case Ricki’s self-directed IRA owns 60% of the house and my self-directed IRA owns 40%.
We used a title company familiar with the unique titling required on the purchase agreement associated with a retirement account. This title company had closed several other sales like ours and the investment titling (which was one of a few differences when using a self-directed IRA to purchase real property as the property is titled in name of IRA) presented no problem.
By using our self-directed IRAs to purchase income property all our rent income flows into our IRAs tax free and any profits when we sell will also go back into our tax-advantage accounts. We sleep better at night knowing our retirement assets are safe and invested in real property and not subject to the risk of the stock or bond markets. Let us know if you have any questions about how this can work for you and your IRA nest egg.