You may collateralize the loan just as you would any other debt instrument. For more information, check out our Private Lending page.
If your business is a sole proprietorship, partnership, limited liability corporation (LLC), or incorporated business, including subchapter "S" Corporation, without employees you may establish a Solo 401(k) plan.
Yes, foreclosed property is purchased from the lender directly by directing the purchase through the IRA administrator. The plan makes the payment to the lender and the property is then titled in the name of your IRA.
Pre-foreclosures are negotiated with the owner of the property, as in any property purchase. The debt is paid out of escrow, and the property is then placed into the IRA plan
Yes! Physical gold, silver, platinum, and palladium are all allowed by the IRS.
For further information on this topic, view our precious metals page.
Yes. Contrary to what you may have heard, the IRS places very few limits on what you may buy with your IRA retirement funds. Most IRA providers put limits on your retirement account by not servicing assets like real estate. Check out our real estate page to learn more
You may not personally do any work on the property, for pay or for free, and neither can any other disqualified persons or any company you or they own. Work can be done by anyone else, and you still have control over what you want them to do. Basically, you cannot personally put the paint on the walls but you can show the painter how to hold the paintbrush and tell him what colors you want where
Yes, you may choose to take the property as a distribution from your IRA. Once the property is 100% in your possession you are free to use the property as you wish
You may use this valuation as long as it is an appraisal for real estate or third party valuation for non-real estate assets and the valuation is accompanied by adequate information supporting the value and a properly executed valuation form. The valuation must be as of December 31st of the prior year
Yes. The valuation must follow the same requirements for accounts subject to Required Minimum Distributions except that the valuation date must be as of the date of the distribution or conversion request or within a reasonable time period
No. This must be done by the IRA holder using the method they deem most appropriate. You are strongly encouraged to talk to your CPA, tax/legal advisor or other professionals in order to make the decisions on what needs to be done
No, because the property is owned within a tax deferred (Traditional IRA) or tax free (Roth IRA) plan no capital gains taxes need to be paid. If there is outstanding leverage at the time of sale, UBIT may apply. Ask us for details
No, an LLC may be used to purchase real estate, but it is not required. Your IRA is its own legal entity and can purchase a property without having to establish an LLC to hold title
No, New Direction IRA does not sell any products nor promote any particular vendors. The IRA holder is responsible for choosing the precious metals dealer and the type of product as part of their due diligence
Yes. According to IRS.gov "IRA law does not prohibit investing in real estate but trustees are not required to offer real estate as an option". To invest in real estate your IRA provider must allow it
To direct New Direction to purchase precious metals with the funds in your IRA, you would:
Open an IRA with New Direction IRA, Inc. (download an application)
Fund the new IRA with a transfer of existing IRA funds, a rollover of old 401(k) funds, or an annual IRA contribution.
Once the IRA is opened and funded, the client will work with a precious metals dealer of their choice to determine the precious metals that will be purchased, the price and the terms.
Client will direct New Direction to purchase the precious metals by completing a New Direction Buy Direction Letter, and the dealer will send an invoice to NDIRA.
New Direction IRA, Inc. typically funds investments within 24 hours of receiving the Buy Direction Letter and Invoice.
Once purchased, the metals will be shipped to a depository that the IRA holder has selected. The metals will reside in an account established for the IRA at that depository
You find the real estate asset that you would like your IRA to acquire. Remember that an IRA can purchase a property outright, can partner with other investors, or can secure a non-recourse loan to achieve the purchase price.
You negotiate the terms of the purchase. You fill out a Buy Direction Letter which directs us to sign closing documents and send funds from your IRA to close the deal. You will have selected a proper escrow/title company/attorney to work with us to close the transactionIncome is received by the IRA and expenses are paid in accordance with your instructions from the IRA
The answer to that question may have a lot considerations associated with it. The factors to consider include:
Non-recourse lenders may be mortgage lenders, personal lenders, credit unions and community banks. Large institutional lenders usually do not lend on a non-recourse basis. Non-recourse Lenders may ask for additional down payment to make the loan-to-value ratio less. You may provide third party guarantors, as long as they are not disqualified NDIRA has a list of known non-recourse lenders. Contact us for details
You can find that information here, as well as in IRS publications 560 and 590, available on the IRS website.
The first step is to open an account by downloading an application or contacting our office at firstname.lastname@example.org, (877)-742-1270 or (303)-546-7930
The Solo 401(k) was designed exclusively for owner-only and small businesses with no employees or if the employees fall outside of certain eligibility requirements. Be sure to verify this exclusion information with your New Direction IRA representative to avoid increased plan fees. As of January 1, 2006, individuals are allowed to claim a portion of their contributions as Roth contributions, thereby taking advantage of the potential for tax-free growth.Consider a Solo(k) if you are a a company with no additional employees other than your spouse or partners.
You may receive checks that are made payable to your New Direction account and forward them on to New Direction, or you can have a third party servicer (other than a disqualified person) receive the payments and make a net check payable to your account
You have two ways to manage expenses generated by your IRA investments:
1. myDirection Online Client Portal (myDirection.com)
Cost = Free for 5 day processing
- OR -
2. Submit bills, invoices, etc. to New Direction IRA, Inc. via fax, email or mail along with a Payment Authorization Letter.
Cost = per check
We invite you to use our myDirection® Online Client Portal Bill Pay section to pay your bills. This can reduce the amount of fees you pay for each check, and you won’t have to send documentation to us each time a bill needs to paid.
If you do not meet the criteria for using the myDirection® Online Client Portal, you may still direct us to make your expense payments. All bills, although set up in the name of your IRA, must be mailed to your mailing address. You should review the bills, invoices, statements, estimates, etc., mark them as “read and approved” and then fax, email or mail them to us with a completed Payment Authorization Letter.
A 401(k) plan document must be written to allow "alternative" assets in order for the plan to acquire those assets. NDIRA offers an Individual 401(k) plan that provides for any type of asset allowed by law as well as the bookkeeping to substantiate those assets as part of the plan. With an Individual 401(k), you may appoint yourself the trustee. Once you have the correct plan and are named the trustee, you can use plan funds to purchase assets like real estate, precious metals, private equity, etc. Those assets are then owned by the plan and any money that they make becomes part of the plan.
This is considered a prohibited transaction and you may not borrow funds personally from your IRA under any circumstances. You may lend to any person other than disqualified persons or companies. Check out our Private Lending page
All updates to address and other contact information must be done in writing. Please download the Change of Address Form, complete the form, and return to our office.
Because each case is different there is no set time line for a real estate transaction. However, an average time line might go as follows:
We require all closing documents three full business days prior to closing. The documents will be received and reviewed in this time. If everything is in good order, the funds will be sent to the closing process
There are no time restrictions or limitations on buying or selling a property, you could choose to sell a property the day after closing
It usually takes 2-4 weeks to transfer an IRA from one custodian to another. Transfers are not reportable, taxable or penalized. You can do as many transfers in a year as you like, whereas you are limited to one distribution/rollover every 12 months
Life events such as marriage, birth of a child, starting your own business, a divorce or a death are some examples of reasons to review your beneficiary designation and see if your objective has changed. It is a good idea to review your beneficiaries periodically, and share that information with anyone assisting you in your estate planning goals.
Your 401(k) plan may, at your direction, be invested in real estate if the investment provisions of the plan permit it. The employer establishes the plan for the benefit of the employees. The employer will have specific investment language incorporated in the plan, which states what options are available to the employee
No, you may have debt-financed property in your IRA as long as neither you nor any other disqualified person personally guarantees the debt
A beneficiary who is an individual may be required to take the entire account by the end of the fifth year following the year of the owner's death. If this rule applies, no distribution is required for any year before that fifth year.Additionally, the beneficiary individual may have the option to take required minimum distributions on the account. This is calculation is based on the age of the beneficiary, and corresponding numbers found within the single life expectancy charts.
No. All IRA custodians are required to provide a year-end value for IRA accounts. Unlike securities, where the value is easily determined by the market, non-traditional assets, real estate in particular, require individual valuation
No. For assets where fair market value cannot be determined and documented such as real estate and private placements this must be provided by a non-disqualified person to your IRA who has the expertise to provide a valuation
There are several reasons we reject valuations. They are as follows:
The retirement investments that most people know about are are securities sold by brokerage companies and funds. "Alternative" investments are everything else. Almost anything you can invest in outside of your IRA can be purchased inside your IRA.. This larger selection of assets may allow your to achieve a broad level of diversification that traditional investments don't allow. Specifically, you may purchase (among others) notes, options, private equity, real estate, precious metals, timber deeds, crops, cattle, stocks, bonds, mutual funds, certificates of deposit, and more: anything which is not prohibited as defined by the Internal Revenue code
This is a question that is best answered by the business owner and their financial team. NDIRA, however, can provide information about the features of the plans we offer. If you have no common law employees—those which are not spouses, owners, or partners—the most flexible plan is the Individual 401(k).. The administration is straightforward and you can be the trustee, custodian, and administrator, unlike IRA plans.
The SEP-IRA is also a common and easy plan for employers, but there are percentage limitations on contributions and less flexibility than an Individual 401(k).The SIMPLE IRA is a small company plan allowing employee deferral and employer matching
For IRAs, New Direction provides administration and bookkeeping for "alternative" assets like real estate, precious metals, and more. All non-invested cash is kept in an FDIC-insured position.
For qualified plans, such as the Individual 401(k), NDIRA provides record keeping services for the plan
Unrelated Business Income Tax (UBIT) applies to debt financed property in IRAs and also applies to operating income received from companies owned by IRAs and qualified plans. Typically the debt financed income is taxable under UBIT rules for the percentage of property that is debt financed
If the emergency is in compliance with hardship withdrawal rules you may borrow money from the plan prior to the age of 59.5 without incurring the 10% penalty. You may withdraw funds from your IRA or plan provided you repay the funds within 60 days of distribution.
IRA assets are assigned according to beneficiary designation forms that the IRA holder fills out when opening the account or later submits to amend the account. These forms notify the custodian about who will inherit the account
Failure to provide a valuation may ultimately result in the distribution of your asset to you. Accounts that have shown no activity, including the valuation, cannot continue to be held by New Direction because we cannot meet the IRS requirement on updating the value and filing an accurate Form 5498 for your account
If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. This means that you cannot make any contributions to the IRA. It also means you cannot roll over any amounts into or out of the inherited IRA. However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary.
Like the original owner, you generally will not owe tax on the assets in the IRA until you receive distributions from it. You must begin receiving distributions from the IRA under the rules for distributions that apply to beneficiaries
If you inherit an IRA from your spouse you can:
There are two asset types not allowed by the IRS: Life insurance and collectibles. A self directed IRA provider like NDIRA services almost all assets allowed by law.
An IRA may have retirement dollars in assets such as:
An employer sponsored retirement account tailored for companies without any employees that extend the same benefits found with larger company 401(k) plans. Solo 401(k) plans provide increased contributions limits, tax deferred advantages, and flexible plan designs
It's up to you to find the property. There are generally no limitations or restrictions other than that the property that your IRA purchases cannot be something you or any disqualified person currently own. If you need help finding an investment property, it may be helpful to consult a real estate professional
New Direction IRA administers all types of self directed retirement plans. Traditional IRA, Roth IRA, HSA, SEP IRA, SIMPLE IRA, and Individual 401(k) can all purchase precious metals
Disqualified persons to your plan are:
You can name your spouse, children, grandchildren or other individuals; you may also name a trust, charity, or some combination of the above. See IRS Publication 590 for additional rules governing each types
The IRA does. If your IRA does not contain sufficient funds to do so, you will have to make an annual contribution, transfer funds from another IRA or consult with your financial advisor on other alternative for paying for the service
One of our requirements as your administrator is that you submit a fair market valuation of assets owned by your IRA annually.
The 5305-A, “IRA Custodial Account Agreement” states the following:
5.02 The Custodian or Administrator agrees to submit to the Internal Revenue Service (IRS) and Depositor the reports prescribed by the IRS. In the case of reports on form 5498, the Depositor agrees that Depositor is responsible for providing an annual report to Custodian or Administrator of the fair market value of all assets in any Custodial Account as of the last day of any calendar year, and that if Depositor fails to provide such fair market value information, that Custodian or Administrator shall issue a report on form 5498 to the IRS using the acquisition price of the assets in question. The IRS will be auditing self directed IRA custodians in the near future and you will be required to provide satisfactory evidence of fair market value for us to file Form 5498 on behalf of your IRA. It is our job to maintain the tax-deferred status of the account by fulfilling this requirement
Retirement investing has been dominated by the securities industry since 1974 but real estate has always been available as an asset. Until recently, it was hard to find an IRA administrator that handled real estate
Naming a beneficiary provides you with the estate planning knowledge of who will inherit your IRA at your death. Additionally, it can be a tax advantage for your heirs inasmuch as it bypasses probate
The beneficiary designation generally overrides a will or trust