- Self-Directed Accounts
- Investment Types
- Why Equity Trust
- Institutional Solutions
If you have sufficient funds in your self-directed IRA to cover the purchase price, closing costs, taxes, insurance, etc., you can purchase a property outright. All ongoing expenses are paid in total from your self-directed IRA, and all income/profits are returned in total to the IRA.
If you don’t have enough funds for a cash purchase, your self-directed IRA can purchase an undivided interest in a property.
For example, your self-directed IRA could partner with a family member, friend, or business associate to purchase a property for $100,000. The friend could provide 70% of the purchase price ($70,000), and your self-directed IRA could purchase the remaining 30% ($30,000).
All ongoing expenses must be paid in relation to your percentage ownership. In our example, for a $1,000 property tax bill, the friend would pay $700 (70%) of the bill and your self-directed IRA would pay $300 (30%).
Likewise, if the property collected monthly rent of $1,000, the friend would receive $700 (70%) and your self-directed IRA would receive $300 (30%).
An IRA may obtain financing (loan/mortgage) for a real estate investment. However, you must be aware of two points when considering this option:
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