When several investors ask the same question, I suppose others would also want the answer. The recurring question is “Can an investment in the VWC Multifamily Fund IV be purchased inside an IRA?” I find that many investors are unaware that this is available, and where some of the most strategic wealth in America resides. The popularity of IRAs has grown significantly since they were introduced 47 years ago. And once a person is detached from an employee benefit plan, the IRA can become “self-directed” putting the account holder in charge of investment selection.
The Self-Directed IRA (SDIRA) features the same annual contribution limits as other IRAs (for the tax year 2021, $6,000 for people younger than age 50, and $7,000 for those 50 years of age and older). These SDIRAs enable you to save for retirement on a tax-advantaged basis in a most powerful way, using Real Estate, Oil & Gas, and other opportunistic Alternative Investments without paying current income taxes or capital gains taxes on the investment gains.
During the 2012 presidential election, the Wall Street Journal revealed that Mitt Romney had over $100 million his IRA. People wondered how this was possible because (back in 2012) investors could not place more than $5,000 or $6,000 annually into their IRAs. The answer is that Romney’s IRA included positions in 13 investment entities such as real estate, oil and gas, and other partnerships managed by Bain Capital, the private equity firm he co-founded and led for 13 years. He placed his investments in the IRA before they appreciated in value, and they grew tax free over many years. This sounds like investing in value-added investments, which is what our investors experience at VisionWise Capital. By investing their IRA money in an under-valued property, they participate in the direct purchase of several apartment buildings that are restored, stabilized, and have their values increased by moving the rental income to the higher local market rate.
Jim Rohn once said, “There are things in life that we know we should do, and could do, but we DON’T.” Having your IRA available to invest in real estate, but not doing it, seems unwise. Perhaps having this knowledge will cause you to make a move. When investing for retirement, investors often use their cash accounts to invest in real estate, and their Individual Retirement Accounts (IRA’s) to purchase portfolio investments like stocks, bonds, ETF’s, and mutual funds. Many investors do not know that they can buy a house for rent, or a commercial income property in their SDIRA, so some of them don’t.
The benefits of a traditional IRA are fully engaged in a SDIRA. The SDIRA owner will not have to pay current capital gains tax on the activity in the SDIRA, no capital gains tax on the sale of a building that is purchased in the SDIRA, no current income tax on the cash flow from the properties owned by your SDIRA. As long as the money stays in the self-directed IRA, it grows tax-deferred until you withdraw it. (Note that with a Self-Directed “Roth” IRA, you will not pay taxes even when you eventually make qualified withdrawals. See this article on “What is a Self-Directed IRA” for more details.)
How to Open a Self-Directed IRA
1. Find a Custodian
We can help you choose an accredited Custodian, one that specializes in self-directed IRAs. We can send you a matrix of six Custodians we use to hold direct real estate investments, including Pensco, Equity Trust, IRAR Trust Company and Pacific Premier Trust. Investopedia also recommends these custodians: IRA Financial, UDirect IRA (best for real estate investing), The Entrust Group, Alto IRA and Rocket Dollar.
2. Choose What Products to Buy (Real Estate, Oil & Gas, Commodities, etc.)
After you have selected a custodian, meet with your financial advisor for assistance in deciding which of the many alternative investment products you should buy, and then seek a trustworthy Sponsor.
3. Complete the Transaction
After deciding on your custodian, opening your account, and deciding on your Sponsored investment, you can now direct your custodian on how your dollars will be invested.
Are you interested in learning more about investing in real estate using your self-directed IRA? VisionWise Capital specializes in providing fee efficient investments for accredited investors who want to diversify their portfolios with real estate income. VWC works hard to find and acquire carefully selected multifamily projects for you. Properties are managed professionally, and fund investors receive scheduled distributions. Contact VisionWise at (949) 441-5580 or firstname.lastname@example.org.