Invest in bank-owned real estate properties with your IRA

If a property has been foreclosed and taken back by the bank, it is referred to as real estate owned, or REO. In today’s real estate market, your IRA can take advantage of purchasing distressed properties. Some investors buy at foreclosure auctions; others buy REO properties directly from the bank.

2 very important factors to consider when purchasing real estate owned properties in an IRA:

1. Due diligence for your property

First and foremost, check with the department of real estate in the state where you’re interested in buying a foreclosure to make sure you’re up to date with current legislation. Research to see if there are any liens on the property, as these must be paid off before the property can be sold. Have the property inspected by a professional to determine condition, as many REOs are sold “as-is.” You want to avoid any surprises.

2. Financing foreclosures with your IRA

As with any investment, evaluate the total cost of the property before purchasing it. If your IRA does not have enough funds to purchase the asset, you have options. You may also leverage the purchase with a non-recourse loan. This will mean taking the time to find a non-recourse lender willing to work with you or to partner your IRA. Contact an Entrust office for information on lenders that work with Entrust.

After the purchase, all repairs, renovations, taxes, or other expenses are paid for from the IRA, and all rental income goes into the IRA tax deferred. If your IRA is a partner and owns only a portion of the property, all expenses and income are based on the percentage that the IRA owns.

Disclaimer: Before you invest in this business sector using your IRA, it is best to consult with your investment, legal and tax advisor.  Entrust does not endorse or recommend any of these investments.  Proper due diligence by you the IRA holder is recommended before entering into any transaction.