Using a Self Directed IRA LLC To Purchase Real Estate

February 28th, 2012

Most people mistakenly believe that their IRA must be invested in bank CDs, the stock market, or mutual funds. Few Investors realize that the IRS has always permitted real estate to be held inside IRA retirement accounts. Investments in real estate with a Self Directed IRA LLC are fully permissible under the Employee Retirement Income Security Act of 1974 (ERISA). IRS rules permit you to engage in almost any type of real estate investment, aside generally from any investment involving a disqualified person.

In addition, the IRS states the following on their website : “…..IRA law does not prohibit investing in real estate but trustees are not required to offer real estate as an option.”

Investments in real estate are still considered to be solid investments.  Appearing live on CNBC’s Squawk Box, Warren Buffett recently told Becky Quick he’d buy up “millions” of single family homes if it were practical to do so (as reported on CNBC 2/27/12).

Income or gains generated by an IRA generate tax-deferred/tax-free profits. Using a Self Directed IRA LLC to purchase real estate allows the IRA to earn tax-free income/gains and pay taxes at a future date (in the case of a Roth IRA the income/gains are always tax-free), rather than in the year the investment produces income.

With a Self-Directed IRA LLC, you can invest tax-free and not have to pay taxes right away – or in the case of a Roth IRA – ever! All the income or gains from your real estate deals flow though to your IRA tax-free!