I have a few IRAs. I have a Roth, traditional, and a self directed IRA that I hold precious metals in. I am thinking about transferring money from my traditional into a self directed IRA to buy and hold property. I have a few questions though.
1 Can I use the same self directed IRA that I hold the precious metals in?
2 I only have enough money in the traditional IRA to be used as a down payment on a property. If I need to add more money to the IRA, because of unforeseen expenses, will that be legal? Currently I am only allowed to add $5500 per year.
3 If I sell the property to upgrade, would I have to do a 1031 exchange even though it is already in a tax deferred account?
4 Is there a better approach to IRA investing?
If your IRA is truly self-directed then yes, you can use it to buy rental property. You can add funds in your IRA either by making new contribution which as you stated is limited to $5,500/yr or by transfer from another qualified retirement account.
I would open a seperate IRA for real estate because of the liability associated with real estate for asset protection reasons and not use the precious metals Ira
@Dmitriy Fomichenko answered the "adding money" question right on. In addition, Your Ira can borrow money with a non recourse loan. If this loan is still in place when you sell you can use a 1031 exchange to postpone or eliminate the Unrelated business income tax and/or unrelated debt financed income tax that would be due as a result of your IRAS Non Recourse loan.
There are several different approaches with self direction and a little account- wholesale the deal, Ira can partner with another, JV, etc. PM me if you need more details or options of what some of our clients do.
There are generally two ways to get money into an IRA:
1. Make annual IRA contributions if you have earned income:
2. Transfer other IRAs for former employer funds to the IRA.
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