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Get a FREE assessment of your Lubbock rental property. Start here!

Get a FREE assessment of your Lubbock rental property. Start here!

Fund Your First Lubbock Rental Property with a Self-Guided 401(k)

Model House and Cash in a Miniature Shopping CartInvesting in residential rental properties is safe and profitable but getting the funds for a down payment can appear like an overwhelming, impossible issue. Nonetheless, accessing the funds you have to invest in real estate may be rather easier than you believe. If you possess a 401(k) plan or an Individual Retirement Account (IRA), you can surely be able to put them to use to fund a rental property purchase in Lubbock. Furthermore, with the right planning, utilizing a retirement account to fund an investment in real estate, could result in little or no tax implications. By utilizing funds you already possess, you really can invest in a much more profitable future now.

An IRA or 401(k) is a long-term savings account that can present several tax advantages in case certain IRS regulations are followed. In certain instances, these retirement savings accounts are self-directed, thus you can choose how to invest the funds in the account. As an example, a self-directed 401(k) can be put in mutual funds, bonds, and much more. Nevertheless, the law prohibits direct investment into real estate from a 401(k). To get access to your 401(k) funds, you will have to carry out various extra measures.

To put to use a 401(k) to invest in real estate, your alternatives generally include either getting a loan against your retirement account or transferring the funds in your 401(k) to an IRA account. The dilemma with filing a loan against a 401(k) is that it may give rise to those funds being taxed, a matter that many investors would rather avoid. Accordingly, the better course available is to transfer your 401(k) into a self-directed IRA. The transfer itself is typically tax-free. In addition, and unlike a 401(k), many IRA accounts can be used for a wide range of investments, including real estate.

To create a self-directed IRA, you’ll have to do it through an IRA custodian such as Equity Trust, Community National Bank, IRA Services Trust Company, or others. The new IRA account can be funded by using an existing IRA or rolling over a 401(k), a process your IRA custodian must be able to aid you with. Moreover, as soon as you are willing to acquire your residential rental property, you should submit a direction of investment form and get it approved. After it’s approved, you can then request for the funds you require to complete the acquisition. To achieve this, the name of your IRA must appear on the title of the property, letting your custodian issue funds. You would then have an investment property by your IRA account holder.

Due to the way that ownership is created employing an IRA, all current charges and revenue from the rental property should then be executed straight from your IRA custodian account. This comprises any proceeds from the eventual sale of your investment property. Anytime you sell a rental home that was purchased with an IRA account, the proceeds from the sale must remain in the IRA account. The benefit of having it through this method is that all these funds are not right away taxed, but on the contrary that tax liability is delayed to the further purpose of the funds.

An additional vital element to understand concerning making use of a self-directed IRA to fund your investment in real estate is that you will not be in a position to manage your rental property yourself. Alternatively, you’ll have to hire a professional property management company such as Real Property Management to handle the rental’s continual activities and operations. Although instead of a constraint, this technique to real estate investing is in line with current business models, where an investment property owner partners with quality professionals to grow their wealth.

There are only a few investment options with the stability and potential that residential real estate has to offer. When you bring in Real Property Management Services to support you in your investment proceedings, you’ll realize that you have a comprehensive and professional team of property management experts on your team. We attend to every bit of these things, from the most common to the laborious burdens, allotting you the time to improve and grow your investment portfolio into all-out, complete financial freedom. Contact us or call us at 806-853-6546 for more information.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.