real estate investing strategy
New to forum. My friends and I have been buying foreclosures to resell outside of retirement accounts. We would like to do this in retirement accounts and I am frustrated in getting reliable advice on structuring this to avoid violating rules. We are generating large profits that we would prefer tax free or deferred. Flipping is intended to avoid valuation issues. Any advice or contacts? Homes are in San Diego and Phoenix.
Permalink Submitted by Alan Spross on Fri, 2008-06-06 19:45
You need to contact a custodian that specializes in self directed IRAs such as Pensco, Entrust or Guidant. There are plenty of pitfalls that can trigger a prohibited transaction and/or IRA disqualification, but these custodians can apparently deal with the challenges effectively.
I do not imagine that foreclosure purchases are inherently any different than other active real estate purchases with IRA funds, but these firms should be familiar with foreclosure purchases as well.
Permalink Submitted by Ron Carter on Fri, 2008-06-06 20:31
Thanks for the response. We have accounts with Equity Trust (New name but don’t remember) and they have given me the guidelines and said go ahead but……. I have had tax attorneys and investors raise caution flags. Some view holding rentals as being a business. Others were concerned that the IRA owner has a say in deciding what property is purchased and said they would only hold securites or reits holding real estate. The concern was also raised about flipping being considered “dealing” and a business. As I understand it, the penalties can be more than the original investment and profit gained. I just want to be sure we do it correctly.