Have you been held to the belief that your IRA Investments can only contain stocks, bonds and mutual funds? The fact is that your IRA accounts can be used to acquire other types of investments such as Real Estate, Secured and Unsecured Notes and more. Your retirement account should be one that allows you to invest in what you know.
Some IRA Investments Options:
Real Estate – This includes Single and Multi-family Residential Rental Properties, Commercial Property and Bare Lands
Businesses – Including LLC’s and LLP’s
Oil and Gas
Stocks, Bonds, and Mutual Funds
Notes and Mortgages – both Secured and Unsecured
PITFALLS AND TRAPS
The IRA is established for the exclusive benefit of the individual so no “self dealing” or dealing with disqualified individual-members of your family is allowed (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant; manager of your IRA, investment advisor to your IRA, or person with discretionary authority over IRA).
Examples of prohibited transactions:
- Borrowing money from your IRA or personal loans to your IRA
- Selling property to or buying from your IRA
- Receiving unreasonable compensation for managing a property for your IRA
- Using your IRA as security for a loan or personally guaranteeing a loan made to your IRA
- Buying property for personal use (present or future)
Generally, a prohibited transaction in connection with an IRA account at any time during the year will result in the account ceasing to be treated as an IRA as of the first day of that year.
Unrelated Business Income & Unrelated Financing Tax
If income is derived from “business” activity or IRA owned property is leveraged, any appreciation or revenues attributed to the other activity/leverage is considered “unrelated” and a tax applies.
An IRA may borrow funds to acquire a property although the loan must be to the IRA and non-recourse to the IRA owner or any other disqualified party.
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