Investing in Real Estate as Part of a Retirement Plan

By
Real Estate Broker Owner with Don Sabinske, Sabinske & Associates Inc.

Again, I want to emphasize that I am not a financial planner, accountant, CPA or lawyer, however,  I have had experience with people who have purchased real estate as part of their retirement or financial plan.

These people come to me because they have been referred.  I treat them as I would any other client who is looking for "investment" property. 

Some people are under the mistaken assumption that the only permitted investments include stocks, bonds, mutual funds and REITs is incorrect in a self-directed IRA.  The only things which are not permitted are those prohibited in Section 4975 of the IRS code, and for IRAs, collectibles. Please note that the IRS does not have an approved or non-approved list of investments.  
 
Next, the purchase of retirement homes in IRAs and Qualified plans: the beneficial owner of such an account may direct his or her plan to purchase a home in an IRA for investment purposes. This means that a disqualified person (say the beneficial owner, his or her ascendants or descendants) may not have use or live in the home, as this would violate the prohibited transaction rules. However, when the individual is eligible to receive a distribution from the IRA or plan, the home may be distributed to the beneficial owner, at which time tax must be paid (unless it is in a Roth IRA) on the value of the home.
 
The self-directed plans, including IRAs and Keoghs, permit complete diversification in any assets permitted by law, which includes real property, notes and most anything else. This includes leveraged real estate, the leveraged portion being subject to unrelated business income tax.
 
There are about 15 major companies and hundreds of banks trust departments which administer IRAs and Keoghs where clients have held Real Estate, Notes, LPs, LLCs and many other diverse investments. All of these are regulated by an agency of the federal government. All of these companies and banks know the IRS code, and know what it says. The IRS code along with private letter rulings and prohibited transactions, and publications 560, 590, 575 and more deal with this subject in some form. 

If you, or someone you know, is looking for real estate at these rock-bottom prices and low interest rates, please let me know.  Or put them in touch with me, and I will make sure that they have all the information they need to make an informed decision. 

Posted by

Don Sabinske, Broker, GRI

www.donsabinske.com

Sabinske & Associates Inc.

763-350-7960

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  1. Marshall Enterprises 01/25/2013 06:32 AM
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Topic:
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Tags:
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Ambassador
725,448
Debbie Laity
Your Real Estate Resource for Delta County, CO
Cedaredge Land Company

You are right to direct these types of clients toward a tax and accountant professional. We can assistant with a real estate transaction, but leave the other details up to the experts.

January 16, 2013 06:58 PM
Ambassador
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Suzanne McLaughlin
Wright & Sherburne Counties Realtor
Sabinske & Associates, Inc. (Albertville, St. Michael)

This is a great idea, Don.  And, one we should work on more.  Thanks.

January 25, 2013 06:24 AM
Rainer
108,321
Marshall Enterprises
Antiques, Lawn Care, and Trashouts
Marshall Enterprises

This makes good sense.  And, I think it is worth a reblog.  Thanks.  

January 25, 2013 06:31 AM
Rainmaker
312,969
Frank Laisch
"The Insurance Guy"
Stewart Title Company

Don, Great post on investment homes, I am glad you stress that you are not a financial planner. so many may get caught up in that. there is a fine line to walk there. Thanks for sharing

January 29, 2013 03:06 AM
Anonymous
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Don Sabinske

Sabinske & Associates Inc.
Relocating to Sherburne County? Call me!
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