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Self Directed IRA

  • Why Haven’t I Heard About Self-Directed IRA’s?

A self-directed IRA is an individual retirement account that gives you complete control over your investment choices. Unlike other IRAs, you’re not limited to stocks, bonds, or mutual funds. Self–directed IRAs have been around since 1974. Self-Directed IRAs have not received large attention because most custodians who offer IRAs (banks and brokerage firms) only allow traditional investments at their firms. At Hearon Advisory Group, we believe true diversification includes different asset classes including alternative investments.

 

  • Can My IRA, 401k, 403b, ROTH Directly Own Rental Properties, Raw Land, or Commercial Property?

Once you rollover your 401K or 403B into an IRA, your self-directed IRA can own and invest into several types of investments such as real estate, precious metals, trust deeds, etc. The custodian or LLC, must hold title in the SDIRA name. Certain investments are excluded such as life insurance, certain coins, and collectibles.

  • What Can My Self-Directed IRA Invest Into?

Your self-directed IRA can own and invest into several types of investments such as real estate, precious metals, trust deeds, raw land, etc. However, there are certain items you cannot invest into a self directed IRA such as life insurance, collectibles, and               “S” Corporations.

 

  • Can I Reinvest Rental Income Back Into My Self-Directed IRA Without Paying Taxes?

Yes, this is one of the benefits of investing into real estate. In addition to rental income, you would also receive any appreciation in property growth tax deferred.

 

  • Learn The Advantages and Disadvantages of Investing Directly into Real Estate vs a REIT (real estate investment trust).

Although REIT’s can be considered an “alternative” investment and many investors are attracted to potential higher dividends, a REIT can only reinvest a maximum of 10% of their annual profits back into their core business lines each year. Taxes on dividends are taxed as “ordinary” income not capital gains. If interest rates continue to rise, it can make obtaining capital to purchase real estate more expensive. Non-traded REITs are illiquid due to limited market to sell.

 

  • Can I Partner With A Spouse or Other Individuals On An Investment Through A Self-Directed IRA?

 Yes, your self-directed IRA can own and invest into several types of investments such as real estate, precious metals, trust deeds, etc. However, there are certain items you cannot invest into a self directed IRA such as life insurance, collectibles, and  “S” Corporations. A self-directed IRA can partner with anyone at the time of initial purchase but, the IRA cannot conduct any business with a “disqualified” individual. The following parties are considered disqualified persons:

  • You and your spouse.
  • Your lineal ascendants and descendants, and their spouses.
  • Any person providing plan-related services (custodians, advisors, fiduciaries, administrators).
  • Any entity (business, corporation, partnership) of which you own at least 50 percent, whether directly or indirectly.