7 Tips for Wise Real Estate Investing with Self-Directed IRAs

Self-directed IRAs provide ample opportunity to invest in real estate and related assets. There are critical rules to follow, but there are also several tactics that can help you ensure a greater return on your IRA investment:

1. Allow enough time. If you don’t already have it in place, your self-directed IRA will take 2-4 weeks to establish and fund. Make sure you have it in place before making offers on your real estate investment.
2. Have a buffer. Repairs, management and property taxes on your investment property must come from your IRA funds. Therefore, it’s helpful to have a buffer in your account for unforeseen expenses and to keep tabs on the annual maximum allowable contribution from that account, to ensure you can cover costs.
3. Find a realty investment specialist. Seek out a real estate professional that specializes in investment properties. They will have more knowledge and expertise to provide an accurate analysis of your potential IRA investment.
4. Talk to a property manager. Once you’ve decided on the type of real estate investment you want to make, it’s helpful to talk with a property manager who specializes in that type of property management. Chances are, they have a lot of experience managing IRA investment properties and they will possess valuable insight that provides a relevant perspective.
5. Go “multi”. For most who make IRA investments in residential real estate, there is a lack of available leverage—which creates a concentrated portfolio with a handful of properties. Having multi-family properties gives you a little more security: if you lose one tenant, you still have another to help you through the transition. This can also be applied to commercial investment properties—multiple businesses can fill the same role.
6. Involve your attorney. It’s just smart business to ask your attorney to review any transaction-related documents. These include buy and sell agreements, as well as condominium by-laws.
7. Include your tax professional. They should be able to help you avoid potential issues related to your IRA investment, including those that arise around self-dealing.Taking these steps and assembling a top-notch team from the beginning will help you make the most of your IRA investment.