Greenville, SC (PRWEB) August 28, 2014
American IRA's latest blog addresses an important topic, "Property Management in Real Estate IRAs". Many people wonder whether they are allowed to utilize property managers with real estate held within a Self-Directed IRA. This blog addresses that very topic.
As the blog states, not only is the use of a property manager allowed, it is required with real estate owned within an IRA. For all those wondering why, the blog further explains that the IRS requires assets held within an IRA to be handled at arms length. In other words, the IRA holder is not allowed to provide any services to the assets held within their IRA. Services include but are not limited to: property management, maintenance, legals services, and more.
So, if individuals have to hire people to provide all the services to real estate held within an IRA, does it make sense to use an IRA to buy real estate? Absolutely, this blog lists many of the advantages including: leverage (must be non-recourse), tax benefits (tax-free and/or tax-deferred income), current income in form of rent, potential for price appreciation, potential sale of mineral, pasture, timber or farming rights, capital gains tax treatment on sale (only on leveraged real estate), availability of tax deferral on exchange of “like-kind” properties (only on leveraged real estate), and more.
The blog also goes on to speak about the importance of liquidity within the IRA. Making sure there are enough reserves within the IRA is extremely important since all expenses for the real estate must be paid with funds from the IRA. Additionally, the amount individuals can contribute on an annual basis is limited by the IRS which means that if a major repair is needed it may not always be possible for the IRA owner to contribute additional funds to the IRA to cover the expense of that repair.
This blog also speaks about prohibited parties and the penalties for abusing real estate IRAs.
Click here to read part 1 of this blog.
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