Did you know you can invest IRA dollars in real estate? Neither did I.
I found out as I was researching ways people could participate in equity shares for pastors. Turns out, it’s super easy and a great way to:
- Support affordable housing by co-investing with the pastor’s down payment
- Diversify your IRA portfolio
- Retain non-IRA cash for other purposes
We know it works and is easy because some of our co-investors are already doing it.
Here’s how it works:
- Open a self-directed IRA
- Fund it from your other IRA
- Pick the real estate investment
- Purchase and close
It really is that simple, but, yeah, there are a few forms and provisos. Read on.
- Open an account with a self-directed IRA company that will be the Custodian. Look for one that has an easy form and low fees, at say, IRA Resources, Inc. (And, no, Aslan does not get anything by mentioning IRAR, we just know it has been used successfully with some Aslan co-investors). The old IRAs can be Traditional, Roth, SEP, SIMPL, or Beneficiary.
- Transfer the funds from your current IRA (at say, Vanguard) to your new Self-Directed IRA (at say, IRAR). Make sure you properly title the transfer, so it is not viewed as a withdrawal. The form makes it obvious what to do. Example: IRAR Trust FBO Jane Doe, IRA #12345. And, no, this is not a rollover—that’s only when you exit an employer plan and send the assets to your own personal retirement account.
- Select the real estate investment. With Aslan, that’s easy: designate the home or home fund that you want to participate in.
- You cannot invest in real estate that personally benefits you or your family (e.g., a second home, a child’s first home).
- That’s another reason Aslan is a great way to diversify your IRA investment portfolio: investing alongside pastors meets the arms-length requirement since it is the pastor that directly benefits.
- Complete the purchase agreements and—wait for it—self-direct the funds to the real estate investment:
- Real Estate Purchase Offer Review Form
- Real Estate Buy Direction Letter
- A copy of the purchase contract.
It is your new Self-Directed IRA making the investment, so your role is to Read & Approve the documents. By doing so, you’re giving permission to your Self-Directed IRA to make the investment. Make sure the share is properly titled on all of the documents— include the magic word ‘IRA’ with your name. The self-directed IRA company will execute the investment on your IRA’s behalf.
This sounds complicated but it is the functional equivalent of authorizing your brokerage (say, Schwab) to buy securities and then letting them handle the details with the market, the settlement, etc.
5. Sit back and watch your real estate be purchased. The funds could be directed to Aslan or into escrow depending on the stage of the transaction.
6. Hold the share or the property for as long as you agreed to in the documents. When it is time to exit the investment, transfer the proceeds back to your regular IRA (e.g., the old one at Vanguard) or take it as a qualified distribution when you are the appropriate age. See a tax professional about when and how best to take distributions from your retirement plans.
You’re a great candidate for a self-directed IRA if:
- You’d like to participate in a pastoral equity share but don’t have non-retirement assets available to invest
- You’d like to diversify your retirement portfolio beyond stocks, bonds, and mutual funds
- You’d like to invest in real estate through your IRA but you need an arms-length transaction in which to invest
Happy investing! Read this disclaimer:
Although the material contained in this website was prepared based on information from public and private sources that Nicole Bergeron and Aslan Housing Foundation believe to be reliable, no representation, warranty or undertaking, stated or implied, is given as to the accuracy of the information contained herein, and Nicole Bergeron and Aslan Housing Foundation expressly disclaim any liability for the accuracy and completeness of information contained in this blog and website.
This blog and website is distributed for general informational and educational purposes only and is not intended to constitute legal, tax, accounting, or investment advice. The information, opinions and views contained herein have not been tailored to the investment objectives of any one individual, are current only as of the date hereof and may be subject to change at any time without prior notice. Neither Nicole Bergeron nor Aslan Housing Foundation has any obligation to provide revised opinions in the event of changed circumstances. All investment strategies and investments involve risk of loss. Nothing contained in this blog or website should be construed as investment advice. Any reference to an investment’s past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.
Any ideas or strategies discussed herein should not be undertaken by any individual without prior consultation with a financial professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal financial objectives, needs and risk tolerance. Nicole Bergeron and Aslan Housing Foundation expressly disclaim any liability or loss incurred by any person who acts on the information, ideas or strategies discussed herein.
The information contained herein is not, and shall not constitute an offer to sell, a solicitation of an offer to buy or an offer to purchase any securities, nor should it be deemed to be an offer, or a solicitation of an offer, to purchase or sell any investment product or service.