What to Know Before Investing in Real Estate

Any account offered by NDTCO can invest in real estate. 

An IRA can purchase any type of real estate, including residential, commercial, raw land, agricultural, and more. The IRA can buy the property outright, meaning the IRA is the title holder. If the IRA does not have the full purchase price, the IRA can partner with a person, company/entity, or another IRA. It can also secure a non-recourse loan to buy real estate. 

Real estate in an IRA provides the opportunity to generate income from rent, appreciation, fixing and flipping, and more. 

You, the IRA holder, along with your real estate financial professional, select the property and negotiate the terms. New Direction Trust Company makes sure that the account is custodied correctly, and paperwork substantiates that the asset is part of your IRA and, thus, deserves the tax benefits associated with the account type. 

Possible Structures for Your IRA to Participate in Real Estate​​ 

• Hold title to Real Estate 
  A real estate contract is written between the IRA and the seller. Funds from the IRA are sent to closing for the purchase and the IRA takes title to the property directly. 
• Private Equity in an entity (like an LLC, LP, C-Corp.,etc.) that invests in real estate 
  Your IRA can own a private equity percentage in an entity (LLC, land trust, LP, etc.) that invests in real estate. By partnering with an entity, you can also own Real Estate.  
• Partner with yourself or others 
  If you’re not keen to take out a loan, your plan can partner with other investors, their plans, and even yourself. 

Financing available 
Does your account lack the funds to buy an asset outright? No problem! An account can take out a non-recourse loan to finance the acquisition of a property or boost its purchasing power to purchase more.  

The loan must be a non-recourse loan, meaning personal finances of the IRA holder or another disqualified person cannot guarantee the loan. Non-recourse loans are typically made on income producing property and typically require 35-40% down payment.  

For a list of non-recourse lenders, click here. NDTCO is always here for assistance however cannot recommend or endorse any specific non-recourse lenders.   

Loan money to a borrower who uses Real Estate as collateral 

You can think of your IRA as a private lender. Your IRA can lend money to non-disqualified persons and secure the note with real estate holdings and/or other assets if you like. You and the borrower decide on the term, collateral, and the rate.  

Due Diligence 

As the IRA holder, you are responsible for performing due diligence on your IRA’s investments. Neither the IRS nor NDTCO researches or endorses the investments, properties, property managers, real estate agents, or title companies, involved in your IRA’s transactions. A competent professional in the legal, financial advice or accounting fields can also be engaged if you need additional help deciding if the investment being considered is legitimate, meets your risk tolerance parameters, and is right for your investment goals.  

Fees 

ANNUAL ADMINISTRATION FEES 

(Assessed and billed annually per asset on the anniversary month of your first investment) 

PROCESSING FEES 

OUTGOING MOVEMENT OF FUNDS 

Due when funds leave your account 

Annual Administration fees are charged based upon the custodial services provided and are not dependent upon an investment’s performance. Thus, Administration fees are non-refundable regardless of whether the account holder is unable to generate profits or returns.