Do you want to purchase rental property in California? Did you know that you can invest with the funds in your retirement account? A five- or six-figure balance in an IRA, 401(k), or Health Savings Account can give you a signficant leg-up! Your self-directed IRA can buy rental properties directly; there’s no need to distribute your retirement money!
California has become a hotbed of innovation, especially in the technology industry. New business brings new talent from across the U.S.A. This demand, coupled with some of the highest costs to rent in the country, can present a lucrative opportunity for a real estate IRA in California!
So how does investing in rental properties with personal money differ from investing with your retirement plan? Interestingly enough, tax-advantaged accounts maintain the same benefits when investing in real estate, stocks, or any other such assets. Check out the chart to the right; the biggest difference lies in the retirement investor’s ability to defer taxes on annual earnings! You, as the account holder, remain in the driver’s seat throughout the process.
That being said, the IRS has created rules that IRA, 401(k), or Health Savings Account investors should consider. Don’t hesitate to reach out to NDTCO with any questions or concerns that you may have when it comes to investing your self-directed IRA in California.
|Tax-Deferred Account||Taxable Account|
|My rental property strategy has generated impressive returns! |
Will this impact my tax situation this year?
|No! When your IRA, 401(k), or HSA investments bear fruit, those gains can be completely tax-deferred.*||Yes|
|Can I borrow money to fund the investment?||Yes! On a non-recourse basis, your account can acquire the mortgage it needs to purchase a suitable property.||Yes|
|Can I combine capital with other investors?||Yes! Your account can partner with other investors (or their IRAs!) on the same investment as long as they're not disqualified persons.||Yes|
|Who makes final decisions on which property to purchase?||You! Your account is the property “owner”, but you’re still in control!||You|
|Am I only able to purchase rental property?||No! Your account can certainly buy commercial or residential rental property, but it can also pursue fix & flip projects, undeveloped/raw land, etc.||No|
*Unrelated business income tax (UBIT) may apply on leveraged investments. Contact NDTCO for more information.
At New Direction Trust Company, we strive to make the process of buying property for rental income with your self-directed retirement plan as easy as possible. We offer a combination of technology and live customer relations specialists to create a comprehensive and efficient investment experience. From the time you open your account, to the initiation of your real estate transaction, and until you decide to sell, New Direction Trust Company is here for you!