Duggan kicked off the podcast with a nod to New Direction’s growth since its conception in 2003, as the company now boasts $1.14 billion in account assets under its roof. Humphrey explained this number is indicative of self-directed IRA account growth in general, as more investors become disenchanted with the securities market and seek to invest their retirement savings into a more tangible asset market that they know and understand – such as real estate. In fact, Humphrey pointed out, “self-directed IRAs are the fastest growing segment of the retirement industry as a whole”.
So what kind of IRA does one need to take advantage of real estate investing for retirement? One that you’re in control of (Humphrey). Employer-provided retirement accounts such as 401(k)s typically only allow for securities investments. However, a Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Individual 401(k) and Checkbook IRA can be self-directed. With a self-directed IRA, investors can capitalize on their personal knowledge and experience of the real estate market to purchase real estate, fund fix-and-flip projects, purchase notes, deeds, and partner with other IRA accounts to finance a real estate purchase. You can even use self-directed Health Savings Account (HSA) to invest in real estate.
“Real Estate investors are finding that the IRS doesn’t define what account holders can invest in,” Humphrey explained, “the IRA administrator does.” In other words, the scope of investments your IRA is legally allowed to make is nearly limitless – the only investing limits an account holder may run up against are those exacted by the account administrator. A self-directed IRA administrator like New Direction IRA specializes in the bookkeeping for alternative asset investing so that account holders can invest in anything they desire, as long as it follows IRS guidelines (no life insurance or collectibles). “Any investment you’ve ever made is probably one that you can make through your IRA” (Humphrey). In fact, New Direction IRA was conceived because Co-founder and President Catherine Wynne was interested in investing retirement funds in real estate, and believed there should be a better market for self-directed IRA administrators.
What are the advantages of investing IRA money? Humphrey explained that the IRS made a deal with IRA holders – you can save money in your account and watch your IRA’s real estate investments grow on a tax deferred basis, as long as you as the account holder (along with other disqualified persons) don’t directly benefit from the funds or assets while they’re in the account. Once the account holder reaches legal distribution age, they can access their tax-deferred funds and/or take possession of their assets as a distribution.
“One of the aspects that turns real estate investors to self-directed IRAs is the spectacular market growth" (Humphrey). Your IRA can buy real estate and take advantage of market appreciation – something many Coloradans (particularly those living in the Boulder area for the past 20 years) can appreciate. Tenants from rental properties can send cash directly to your IRA account, which you can direct New Direction to either save in your account, or put toward more investments for your IRA. As far as depreciation goes, your IRA can benefit from depreciation as long as the property is debt leveraged. However, depreciation will not effect your personal finances, because the IRA owns the property, not the IRA account owner.
What is New Direction IRA’s role as a self-directed IRA administrator? New Direction does all the bookkeeping and administrative services for your IRA that is required by the IRS in order to keep a buffer between the IRA account holder and the IRA’s funds/assets. Because your IRA is the owner of all real estate investments made with the IRA funds, New Direction signs all contracts on behalf of your IRA, and sends checks from your account at the direction of the account holder. New Direction does not endorse or recommend any assets or asset providers: “We’re not here to tell people to not buy ocean front property in Arizona,” Humphrey joked, “we’re just here to make sure the paperwork is done right.”
You can watch the full podcast on Boulder Property Network’s YouTube
site, and read RE/MAX of Boulder's blog about the podcast here
. Visit New Direction IRA.com
to learn more about how to start investing in real estate with your self-directed IRA today!