Using your self directed IRA to get tax breaks on building a new custom home

Difficult economic times have spurred non-traditional methods to save for retirement, and many people are using a self-directed IRA to purchase their new home.

A self-directed IRA is the lesser known of IRA options and requires account owners to make active investments on behalf of the plan. To open one, an owner must Hire trustee or custodian to hold the IRA assets and be responsible for administering the account and filing required documents with the IRS. Similar to other IRA accounts, owners can invest in stocks, bonds and mutual funds, but they can also invest in things that investment houses like Charles Schwab, Fidelity and Vanguard don't offer, like small businesses, and homes. Investors may still be leery of investing in the housing market, but real estate investor Scott FladHammer, says real estate can be a good long-term investment and generate higher returns than the stock market. Investing in real-estate also provides a lot of options. Owning real estate can be very rewarding, especially for people who are investing in what they know.

But the process of using a self-directed IRA to jump into investing in real estate requires preparation and caution; so be careful with your money!

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