Invest in Real Estate Using Your Qualified Plans

                    THE OUTSIDE METHOD

This method allows you to purchase real estate utilizing your IRA funds without the prohibitions and with the normal associated tax deductions. This method marries IRC Rule 72(t) with an amortization schedule. The basic restrictions are you must hold the property for five years and the portion of IRA funds used to purchase the property must be transferred to a safe harbor custodial account. Fundamentally, mini distributions are being made by your IRA to pay off a mortgage. Using IRC Rule 72(t) makes this stream of distributions penalty free. Once started, the stream of payments must continue for at least five years or age 59 ½…..whichever is later. 


    A Comparison of Inside and Outside Methods of IRA Purchased Real Estate


INSIDE                                     OUTSIDE

Trustee holds title                    You hold title to property
to property
 
No self-dealing                         Self-dealing is not applicable

Occupancy by you or               No restriction on occupancy  family members prohibited

You cannot manage                 You can manage at your option the property

Only non-recourse loans         Traditional borrowing permitted may be used

UBIT taxes will apply with      No UBIT tax incurred leveraged property
 
IRA must fund                         Both IRA and Non- IRA
all expenses                              funds may be used 
                                                  for expenses

No depreciation allowed         Depreciation may be expensed
Income goes back                   Income goes to you
into IRA
 
At distribution in a                  Sale of property is capital gain traditional IRA tax is              tax
ordinary



In order to qualify for the ‘outside’ method you must be approved to purchase the property as if your IRA were not involved. Remember (and this is very important) at the end of the day you have converted an IRA asset to a personal asset.

If you feel that you qualify and are interested in the outside method, please contact us and we discuss it with you thoroughly and then will refer you our affiliate team experts.