Home > Self Directed IRA

• What is a Self Directed IRA?
• How does it work?
• How much can I contribute?
• How we can help you.

Self-directed IRAs are the subject of increasing interest because they offer freedom for the owner. The owner of a self-directed IRA can make various types of investments whenever they want. With most IRAs the owner has little say in the types of investments. Choices are often limited to mutual funds, annuities, or other traditional investments.

A self-directed IRA gives the owner the flexibility to invest in many investment choices:

• Multi-family apartments
• Commercial buildings
• Vacation real estate
• Business loans, notes, and privately held mortgages
• Business start-ups
• Tax liens
• Franchise opportunities

Owners of self-directed IRAs can still invest in traditional assets like stocks, bonds, mutual funds, and their IRAs are subject to the same rules that govern all IRAs. A self-directed IRA allows the owner to take advantage of any investment allowed under the law.

HOW CAN A SELF-DIRECTED IRA WORK WITH REAL ESTATE?

Purchasing investment real estate with a self-directed IRA provides individuals with a number of favorable tax benefits from the appreciation and cash flow of the property. A piece of rental property can be purchased with self-directed IRA funds; the rents that it collects remain a part of the self-directed IRA. Over time your investment gains value through rents collected, increased value of the real estate, improvements made to the property, and rising real estate values.

Roth IRA	Traditional IRA
Money is tax-deferred while growing Money is tax-free upon withdrawal No minimum distribution Capital gains on wholly owned assets is not taxed	Money is tax-deferred while growing Income tax must be paid at distribution Minimum distribution required at age 70 1/2 All income is taxed at ordinary rates upon distribution

In many cases, it is to your advantage to move your money into a Roth IRA, or to convert your existing IRA or 401k into a Roth IRA if you qualify. We can help you do this.
Unlike 1031 exchanges, specific investment timelines or requirements to purchase "like kind" investments when buying real estate with an IRA do not exist.

ARE THERE LIMITATIONS?

Your investment cannot include the house you live in, a house that an immediate family member lives in, nor can the IRA real estate participate in a time share arrangement. Real estate, as part of your IRA portfolio, must collect funds that go towards retirement.

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All contribution amounts refer to annual contributions:

• $4K to either a regular IRA or ROTH IRA. If you are 50 or older, you can contribute $4,500 to a personal IRA or ROTH IRA for 2005, increasing to 5K in 2006.
• If you own your own company, or work for a company that offers a 401 (k) or Roth 401 (k), you may also contribute to that fund in addition to your personal fund.
• Employees 50 or older can contribute up to 20K to a Roth 401 (k) in 2006. If you are younger than 50 you can contribute 15K
• You cannot put 15K into a Roth 401(k) and another 15K into a Roth IRA in the same year.
• Money in a Roth 401(k) can be rolled over into a Roth IRA later. If this is done, minimum distributions are not required after you reach retirement age. The money could be left in the Roth IRA to accumulate.
• Other plans are available:
• SEP IRA can have a maximum of 44K contributed (limited to 25% of your compensation or 20% of net income if self-employed).
• A Simple IRA can be used by companies with 100 employees or fewer and has a limit of 10K per year or 100% of your net income less ½ of your self-employment tax.

A summary of rules for Roth 401(k)s and Roth IRAs

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For many people, a check book controlled IRA LLC is an excellent option. Checkbook control means you can write checks against the funds in your IRA LLC to purchase businesses, real estate or any qualified investment (bonds, stocks or mutual funds).

An IRA, even a self-directed IRA, really isn’t rocket science. The management of a self-directed IRA is a skill the investor can easily learn. Checkbook control provides something that the investor should relish. Having checkbook control allows flexibility in spending the funds which allows greater control over your own assets and over your own destiny.

Reasons to Form a Self-Directed IRA, LLC:

• Checkbook Control
• Creditor Protection
• An LLC has excellent Liability protections.
• Ability to invest quickly
• No permission, underwriting or approvals required, just write a check.
• Lower custodial fees than other trust companies means a higher net return.
• Allows you and “disqualified individuals” (parents or children) to take part in the same investment.
• The IRA LLC and each disqualified individual can hold separate membership interests in businesses, real estate or other qualified assets.

Getting checkbook control of your self-directed IRA LLC is easy to accomplish with the right planning and knowledge.

Some of the most common Prohibited Transactions:

• The IRA cannot transact business with a “disqualified individual” (you, your spouse, your parents, your children or your children’s spouses…siblings are o.k.)
• The IRA cannot invest in a corporation if 50% or more of that corporation is owned by you
• You cannot commingle IRA funds with discretionary funds (cash)

If an IRA LLC makes sense for you, we can get you started and help keep you going. Once you have your IRA LLC set up, we will always be there for you to answer your questions and support your endeavor in every way we can. Customer service is a major part of our business.

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