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For last month's national webinar we discussed our exclusive Real Estate Investor Research Report. Participants who joined our free webinar had the opportunity to ask Bill Neville, Business Development Manager at The Entrust Group, questions regarding the emerging real estate investment market, self-directed IRA basics and important rules about real estate investments. Continue reading to see what types of questions were answered...
Q: Can my self-directed IRA fund an LLC by partnering with my wife’s self-directed IRA and my son’s Roth IRA? I want to have the LLC buy one or more properties.
A: Partnering with your family members may be an option to purchasing property using your IRA. It is highly recommended to consult with legal counsel before entering into such an arrangement.
Q: Do property managers need to have any specific license or certification before you can pay them for their services?
A: We do not require a special license for a property manager you choose. It is highly recommended for you to do your proper due diligence in selecting your property manager.
Q: Can I take the land out of the IRA as a distribution, and then replace the value of the land into another IRA (as a 60-day rollover)?
A: Unfortunately, the same property must be rolled over if you take a distribution.
Q: Can I combine the funds from my SIMPLE IRA with my wife’s SIMPLE IRA to buy a property?
A: A self-directed IRA can partner with anyone at the time of initial purchase, but after the transaction is complete, the IRA cannot conduct any business with a disqualified person. All income and expenses must be paid proportionately. Seek the assistance of your tax advisor before proceeding.
Q: If my land property tax was paid out of pocket, rather than from the cash holdings within the self-directed IRA, can the funds be reimbursed later from the cash holdings as part of the self-directed IRA?
A: It is not recommended to do such a transaction since the investment expenses must be paid from the IRA. It is best to avoid prohibited types of transactions to avoid loosing the tax deferred status of your IRA.
Q: Can I sell personally-held property to my IRA?
A: Unfortunately, no. That will be considered a prohibited transaction.
Q: Can my wife and I have a joint Roth IRA or do they have to be separate accounts?
A: Each individual retirement account must be established for each of you. There are no "joint" Individual Retirement Accounts.
Q: Is an IRA rollover or using my 401(k) funds the only way I can fund my self-directed IRA? Can I fund it through money from my checking or savings account?
A: Transfers and rollovers are just two of the means to fund an IRA through existing funds from other retirement accounts. Money coming from your own savings or checking account to an IRA is considered a contribution and is subject to limits. $5,500 for 2018 plus an additional $1,000 if you are age 50 or older. To learn more about funding methods, click here.
Q: If I want to purchase a property overseas in Mexico? Do I need to set it up with an LLC?
A: You will need to seek the assistance of legal counsel to see if Mexican law will allow for your IRA to purchase property in Mexico.
Q: How do you handle required minimum distributions that are required when you turn 70 ½ ? Do appraisals need to be done annually to determine value of overall assets?
A: Since Required Minimum Distributions (RMDs) are taxable distributions, appraisals are necessary to determine the true value of the investments. Remember you can always distribute more than what is required.
Q: Can I loan money to my IRA to make a real estate purchase, and then have my IRA pay me back with the rents received?
A: Unfortunately, extending credit to your IRA is considered a prohibited transaction.
Q: Can I use something like Paypal to collect the rent and forward it directly to Entrust?
A: While there is no prohibition to use an outside vendor, you will need to check with your vendor to see if it can set up an account under the name of your IRA since the rental property is owned by your IRA.
Thank you to everyone who participated in our national webinar. We encourage our readers to post any additional questions regarding self-directed IRAs or retirement planning in the comments section below. You can view the full recording of this webinar here to get answers to questions which are not listed in this article.