Edwardsville, Illinois – An IRA fund is your retirement savings. You can invest
your IRA in the stock market but given the painful memories of market collapse and low interest rates, think beyond stocks. You may have dreamt of owning land or commercial property or a holiday home, but not had enough money at hand to invest. You can use your self directed IRA to invest in real estate.
Just because you can invest IRA in real estate does not mean that you should dive head in. A complex set of rules are in place, which, if you break can disqualify your IRA from tax exemption. This will cause you to pay full tax on your property value as well as any penalties associated with rule breaking. Owning a real estate in an IRA is not simple. You need enough cash to pay property expenses such as maintenance costs, management fees and so on.
Buying real estate in an IRA forfeits you from traditional tax advantages of real estate investment such as you cannot deduct mortgage interest, property tax and depreciation. When you sell your property, an IRA turns capital gains into ordinary income.
Let’s explore why buying a real estate in an IRA is beneficial.
According to professionals, the stock market does not look promising whether six months from now or a year. This has caused many retirement savers to think of alternatives to stocks. Booming real estate market has paved a way for the IRA and 401(k) system to profit from this market. Real estate markets can
drop to 10% to 20% in the future, but is still low as compared to stock market rates.
Investing in real estate seems like a good option for almost retired people as a rental income producer that is likely to increase with inflation.
Buy low and sell high is the motto on which investors are buying real estate particularly residential properties today. Homes are selling for as little as 40% to 50% of their original value in 2008. For example, a 3400 square foot five bedroom house in San Francisco Bay Area was listed for $785,000 in 2000 and was sold for $250,000 in 2008.
An IRA buyer will therefore benefit hugely from this market price and can sell for more when the market value rises.
No tax when flipping
When you sell an IRA-owned house, the proceeds are added into the IRA account without any reduction of capital gain tax. On the contrary, if you buy and resell the real estate within one year of your nonretirement funds, you have to pay capital gain tax.
The bottom line is that when you buy real estate with an IRA, you have remote control over your purchased asset which cannot be attained when you own stocks. The question you need to ask is that what is more beneficial for you over the next ten years – stocks or real estate?
ValuQuest Invest specializes in real estate investments and solutions for difficult real estate situations. We buy homes, pay fast cash, sell your home fast, Edwardsville, Glen Carbon, Maryville, Granite City, Collinsville, Troy, Belleville, Shiloh, O’fallon Illinois and entire St. Louis Metro East.