Can I And How To Use a SIMPLE IRA In Real Estate Investing

4 Replies

Hi my name is Bob from Maine , im new to real estate investing. I have been doing alot of studying for the past 6 months, following all of Robert Kiyosaki stuff. I have worked the same full time job for 16 years at a lumber mill and want out of the rat race! I have poor credit from going through bankrupcy about 10 years ago and havent really done anything to fix it. And cant seem to save money. I do have a Simple IRA with the company I work for , its not alot $8000 I think, Is there a way that I can use this as some kind of a down payment towards my first rental property and then get a private invester for the rest? And if so how do I go about doing so ? Thanks Bob

@Bob Edwards

While and IRA can be reconfigured to invest in real estate, it is purely as a means to diversify that tax-sheltered retirement plan, not a way for you to benefit personally in any way. With $8K, you will find it extremely difficult to execute deals that stay within the IRS rules against self-dealing and generate enough return to justify the cost and effort associated with establishing such a plan.

An option that may work, assuming your employer plan allows you to transfer funds to another institution while still working with them, is to move to a self-directed IRA custodian and evaluate investments such as crowdfunds or peer-to-peer lending.

@Bob Edwards

I agree with @Brian Eastman moving the simple to a Self-Directed IRA would allow you to make use of the funds. Any investment you purchased using the funds would be owned by the IRA. You can structure a deal where you own a precentage of the property and another (non-prohibited) investor owns the remaining percentage.

As Brian also mentioned, you could start out by loaning the funds to another investor as $8,000 is difficult to find good deals in real estate. 

Do you have another IRA? Could you combine IRA's to have a larger total amount of IRA funds? Have you made your 2017 contribution?

Most private loan investors will be hesitant for going in at less than 20-25% of the purchase price. And that assuming you find a deal that will allow you to refinance for at minimum what you mortgage and subsequent construction loan will be for. If you haven’t found it already, and I noticed you’re from Windham. There is a monthly central maine investors meeting event which you can find on BP, tomorrow (Nov 1) in Bangor. If you can’t make that, feel free to find the one in southern Maine on November 16th. These people will be able to advise you in person and it’s definitely a good way to make connections within the Maine real estate community.

@Bob Edwards

I would check to see if your current employer would be willing to allow some or all of the participants to each open SIMPLE IRAs at a self-directed IRA custodian such as IRA Services Trust Company.

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