As the concept of real estate investment gains widespread recognition, an increasing number of individuals are tapping into the potential of qualified retirement accounts to acquire real estate as a lucrative asset. This approach, commonly seen with Individual Retirement Accounts (IRAs), allows people to leverage their retirement funds for the purpose of acquiring properties that appreciate in value or generate consistent revenue.
However, it is crucial to grasp the full extent of the tax implications, legal considerations, and other intricacies associated with purchasing real estate in Seattle through your IRA. By delving deeper into these aspects, you can make informed decisions and navigate the complexities of this investment strategy more effectively. Additionally, staying updated on the most relevant information pertaining to the real estate market in Seattle will provide you with valuable insights for maximizing the potential of your IRA-based real estate investments.
So, let’s dive into some tips on buying real estate with your IRA in Seattle Washington!
Tips on Buying Real Estate With Your IRA in Seattle
If you don’t have a self-directed type IRA… first off… you’ll need to connect with your trusted financial advisor to find a reputable and low fee self-directed IRA. Or, connect with us and we can direct you to some very good self-directed IRA companies we’ve worked with in the past.
Open a Self-Directed IRA
The first step for purchasing investment properties in Seattle within your IRA is to open a “self-directed” IRA. You can do this by visiting a qualified financial advisor or other trusted fiduciary to act as the IRA custodian. A fee-only financial advisor can help you set up this account with minimal hassle, while a commission-based financial advisor may attempt to steer you clear of purchasing tangible assets within your IRA (he or she won’t earn much on the investment).
Types of Properties You Can Buy With Your IRA and Rules
How Does Income Work With Real Estate In An IRA?
The income generated in your IRA may not be used for your “personal current benefit.” This means that all income generated by the property must remain within the IRA until you retire. Selling the property will require you to leave all profits within your IRA. Also, property taxes, insurance, improvements, and other costs associated with the property must be paid by the IRA. Failure to comply with these regulations could disqualify your IRA, subjecting you to income taxes on the entire value of the property, plus a 10% early distribution penalty.
It’s important the all distribution rules associated with an IRA (or Roth IRA) including taxation, required minimum distributions, beneficiaries, and other factors do not change when using a self-directed IRA to purchase a property. There can be a huge upside to real estate in your IRA, but it’s best to know exactly what’s in store.