With interest rates on the rise, many home buyers and real estate investors are seeking alternate strategies for purchasing properties. If you don’t have an ample amount of cash to use, another option could be the answer – funds from your IRA (Individual Retirement Account).

Many investors contribute to IRAs each year. The money in these accounts grow tax deferred. Some IRAs (traditional) also allow pre-tax contributions. In exchange for that, the government taxes you on withdrawals – and if you access funds before you turn 59 ½, you could incur an additional 10% “early withdrawal” penalty.

But did you know that there is a type of IRA that allows you to purchase real estate, and to generate tax advantaged growth on the equity, as well as the income, if you own rental property(ies)?

This can be done with a self-directed IRA.

Self-directed IRA accounts can hold a variety of “alternative” investments – including residential and commercial real estate – that are typically prohibited in regular IRAs. One of the biggest benefits is the tax deferral on the increase in your investments, as well as on the cash flow that you generate.

It is important to note that self-directed IRAs are only available through specialized firms that offer the right type of custodial services for them. But going this route can be well worth it from an investment and control standpoint.

Regardless of how you fund your rental real estate purchases, managing properties can be time-consuming. That is why you should consider working with an experienced property management team.

This can alleviate you from having to find and screen tenants, collect monthly rent, respond to emergencies, or take care of the day-to-day maintenance issues. So, if your current (or future) residential rental properties are located in Central Florida, contact us and we’ll show you how to run your real estate investments without them running you!