IRA holders are often told of laws concerning owning real estate within IRAs that prohibit the ownership of foreign real estate and strictly limit the ownership of domestic real estate.
This is not the entire truth. It is usually the major IRA custodians who have restrictive plan documents. With the right structure, your IRA can own beachfront property in Costa Rica or a rental villa in Spain.
The key is to open a self-directed IRA and forming a Limited Liability Company. Such a structure allows you to have checkbook control over your IRA rather than having to ask your custodian to write every check (and pay them a fee for every check they write). In addition to freedom in making investment decisions, a self-directed IRA LLC gives you the ability to avoid 90 percent of the fees you might otherwise have to pay.
The structure works somewhat like this. The Limited Liability Company owns the real estate property and the IRA owns the LLC. By maintaining checkbook control over the IRA, you are able to pay any expenses associated with the property directly from cash within the IRA in compliance with the law. Though some may question the legality of such a structure, the courts have upheld it.
Should you decide you want to start investing in international real estate or other foreign assets, your first concern will be the potential return on your investment, and the stability of the country in which you are considering investing.
At Asset Exchange Strategies, LLC we have had conversations with potential self-directed IRA clients many thousands of times and the myths continue to live on after 20 years in the business. Some things like Sasquatch or area 51 seem to perpetuate in people’s minds without any substantial evidence the concept is correct or myth. Let’s […]
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