A Real Estate IRA, or Checkbook IRA as it is also referred to, is a Self-Directed Individual Retirement Account (IRA) which allows an individual to make decisions and investments on behalf of the retirement account. In this case, investing in real estate.
Due to the distressed property market and portfolio losses in the stock market investors are taking advantage of property prices that are at an all time low and diversifying their retirement plans with real estate, and seeing a much higher return on investment.
Property types which can be held in a Real Estate IRA include:
- Residential
- Commercial
- Industrial buildings
- Land
- Foreign Real Estate
- Farm Land
- Real Estate related notes, liens and options
Who is the Trustee of the Plan?
According to the Employee Retirement Income Security Act (ERISA) of 1974, individuals are allowed by law to manage their own retirement portfolios and act as the Trustee of the plan. This dramatically reduces fees to custodians and allows you to retain full control of your investments.
When you self-manage your plan, the decisions about investments also lie with you. Taking out the ‘middle man’ Custodian now allows you to make a real estate purchase more quickly. Often, good investment properties are lost as Custodians process paperwork related to a purchase. With a Real Estate IRA you can simply write a check and the property is yours.
The Limited Liability Company
To be able to manage and direct funds from your IRA a Limited Liability Company (LLC) is established. The LLC is owned by your IRA and managed by you, the investor, and with signing powers on the bank account you retain ‘Checkbook’ control over your investments.
