How to Own Property Personally and in Your Self Directed IRA

How to Own Property Personally and in Your Self Directed IRA

Self directed IRAs offer a wide array of investments and can be profitable for those who have knowledge in the basics of real estate. This lucrative tool allows you utilize IRA assets or obtain a non recourse mortgage to offer you are broader scope in which to invest. A non recourse mortgage is simply a mortgage for which you are not personally liable. With or without financing, there are a number of advantages to self directed IRAs:

However, there are a number of issues you should take into consideration before purchasing your property:

If you require further financing other than your IRA in order to purchase a property, this can be achieved through a non recourse mortgage. However, if you opt for this type of loan all financing payments for the property must come exclusively from your IRA. The benefit of a non recourse mortgage is that you are not personally liable for the loan. So, this form of loan generally comes with high interest rates and large down payments, which protects the lender from default. Banks are also more likely to provide financing for commercial property or multi-unit ventures as opposed to single-family investments. Further deductions are made through unrelated debt-financed income which occurs if you take out a loan to finance an IRA transaction.

In addition, you will need to prove that your property is capable of making profit. Once you own the property outright, any subsequent money you make through your real estate will go directly into your IRA. The two main options are to sell it or rent it out. Bear in mind that the latter is harder to prove, as your capital is based on potential figures.

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