Financial Success Institute Expects Shocking Results from Real Estate IRA Panel

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The Financial Success Institute has been studying whether a real estate IRA, or real estate owned inside an IRA, may be the best solution for people who have a qualified retirement account and who want to invest their funds into real estate. A panel has convened and it has revealed some possible disadvantages to the real estate IRA.

The real estate IRA may not be the best way to own real estate for people with retirement funds, the Financial Success Institute is expected to report shortly.

The CEO of the Financial Success Institute, Richard Geller, said today that the panel he has out on the question is finding that a real estate IRA may not be the best way for those who want to own real estate in a qualified retirement plan.

Geller said there are at least three reasons for this. "IRAs tend to have smaller balances. So they don't have enough money to purchase some of the real estate that is out there and may require a higher investment. That's one reason that real estate in an IRA may not be ideal."

Geller said that the Financial Success Institute helps people become more active in managing their retirement funds to get a hoped-for higher return than they would by passively investing in the usual Wall Street investments.

"Another reason for a real estate IRA not being ideal is unrelated business income tax and basically a tax on borrowed money. Real estate can offer great leverage via borrowing money and there are often taxes on profits from borrowed money even if the real estate is owned in an IRA," Geller said.

Geller pointed out that taxes on borrowed money for real estate in an IRA defeats one of the best advantages of real estate.

"And there is one more thing," Geller said. "We are finding that the real estate IRA involves a custodian or trustee who must okay or approve transactions. This makes it cumbersome to own real estate inside a self directed IRA because real estate decisions are difficult to make when checks must be issued by a third party trustee.

The Financial Success Institute is expected to make a recommendation as to a way to invest in real estate that may be superior to an IRA. But Geller cautioned that each person's situation is different and that they must seek the advice of a competent tax advisor who knows the laws and knows their situation.

Soon, the Financial Success Institute will issue findings on the real estate IRA from its panel and these findings may result in some new recommendations that an individual should check out with their tax advisor.

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