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Fund Your First Carrollton Rental Property with a Self-Guided 401(k)

Model House and Cash in a Miniature Shopping CartInvesting in residential rental properties is safe and profitable but procuring the funds for a down payment can feel like a hopeless burden. Having said that, accessing the funds you want to invest in real estate is so much easier than you ever thought of before. If you retain a 401(k) plan or an Individual Retirement Account (IRA), you perhaps would be able to employ them to fund a rental property purchase in Carrollton. Not only that, with serious and proper planning, making use of a retirement account to fund an investment in real estate, could result in little or no tax implications. By utilizing funds you already have, you really can invest in a much more profitable future now.

An IRA or 401(k) is a long-term savings account that can grant various tax advantages so long as certain IRS regulations are followed. In several cases, these retirement savings accounts are self-directed, and so you can choose how to invest the funds in the account. As for example, a self-directed 401(k) can be shelled out in mutual funds, bonds, and much more. Nevertheless, the law prohibits direct investment into real estate from a 401(k). To attain access to your 401(k) funds, you will just have to take on a few measures.

To employ a 401(k) to invest in real estate, you typically have to either acquire a loan against your retirement account or transfer the funds in your 401(k) to an IRA account. The concern with making a loan against a 401(k) is that it will probably cause those funds to be taxed, a circumstance that every single investor would rather avoid. As a result, the better direction is to transfer your 401(k) into a self-directed IRA. The transfer itself is typically tax-free. In addition, and unlike a 401(k), many IRA accounts can be used for a wide range of investments, including real estate.

To start a self-directed IRA, you’ll be required to do it through an IRA custodian such as Equity Trust, Community National Bank, IRA Services Trust Company, or others. The new IRA account can be funded by using an existing IRA or rolling over a 401(k), a simple process your IRA custodian can easily facilitate for you. And then, anytime you are all set to buy your residential rental property, you’ll be required to submit a direction of investment form and get it approved. When approved, you can simply request the funds you will be needing to purchase and close your investment. To achieve it, the name of your IRA must appear on the title of the property, allowing your custodian to issue the funds. You would then retain an investment property directly from your IRA account holder.

Because of the manner that ownership is established using an IRA, all current and on-going disbursements and revenue from the rental property would then be required to be made with your IRA custodian account. This involves any proceeds from the eventual sale of your investment property. Shortly after you sell a rental home that was purchased with an IRA account, the proceeds from the sale must remain in the IRA account. The benefit of doing it in this manner is that all these funds are not directly taxed, but in contrast, that tax liability is suspended to future uses of the funds.

Some other relevant point to comprehend in connection with employing a self-directed IRA to invest money in real estate is that you will not be allowed to manage your rental property yourself. Rather, you will have to hire a professional property management company to handle the rental’s operations from then on. Don’t take this as a limitation though as this practice in real estate investing is in line with current business models, where an investment property owner partners with quality professionals to grow their wealth.

There are only very few investment options that show the stability and the potential that residential real estate has to offer. When you appoint Real Property Management LoneStar to help you out in your investment transactions, you’ll realize that you have a comprehensive and professional team of property management consultants on your end. We’ll take charge of all, from the unremarkable to the labor-intensive concerns, granting you the chance and time to enhance and grow your investment portfolio into complete financial freedom. Please contact us online or call our Austin office at 512-520-9060 or our Dallas office at 972-949-2000 for more information.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.