Every year my IRA administrator sends me a Form 5498 which reports my annual contributions to my Roth IRA. This form also reports the Fair Market Valuation of my retirement account to the IRS every year. When dealing in equities, these assets are updated in value by the minute; thus, my IRA administrator simply has to look at my account balance at the close of market on 12-31 to obtain the value to report to the IRS.

When dealing with “non-traditional” assets, valuations become a bit more complex. “Non-traditional” assets are simply investments that are outside the stock market, thus requiring a different form of valuation since they are typically not traded on a public exchange. An IRA holding Real Estate is required to file the same form 5498 as an IRA holding stocks. The difference here is that the stocks are updated in value by the minute, whereas the Real Estate will require an independent valuation.

In order for a self-directed IRA administrator to report year end values to the IRS, they must receive a fair market valuation of the asset from the client. These valuations are also critical for calculating Required Minimum Distributions and valuations for distributions of physical assets. Below are some popular “non-traditional” assets and acceptable documentation for valuations.

• Real Estate – County Authority Tax Bill, Real Estate Broker’s Comparable Values, Certified Appraisal
• Private Equity (LLC, L.P., Private Stock) – Detailed Letter from Asset Manager depicting year end values
• Futures/Forex Trading Accounts – Futures Commission Merchant Trading Account statement as of 12-31
• Precious Metals – Detailed Holdings statement from Depository as of 12-31 reflecting market value
• Secured/Unsecured Notes – Loan Servicing Company should calculate the Principal balance of note as of 12-31

Remember that you can never assume the Fair Market Value of your asset is being reported unless you directly update your self-directed IRA administrator with one of the acceptable forms listed above. Take control of your retirement and INVEST in what you know BEST!

To learn more about Self-Directed IRA’s and taking control over your retirement please contact the professionals at AdvantaIRA Trust at 239-333-1031 or visit www.advantairatrust.com.

Advanta IRA does not sell any products or offer any investment advice. All information is for educational purposes only; please consult your tax advisor or CPA before investing.

This is the third installment from “The eBook – Real Estate IRAs Made Easy”, which can be downloaded for FREE from www.daveowens.com.

Purchasing real estate in your IRA isn’t that much different from a normal purchase of an investment property. Here are some important rules real estate IRAs must follow:

• Title to Assets – When you purchase real estate in a retirement account, the assets will be titled in the name of the custodian or the administrator. Your IRA funds never leave the IRA. Your IRA actually owns the asset. Many people think the money is distributed and is taxable first; this is not true. Just as your IRA can own stocks, it can own real estate.

• Percentage Ownership – Real Estate can be purchased 100% by the IRA account or just a percentage interest in real estate as Tenants in Common.

• You cannot Buy/Sell/Lease your real estate from a disqualified person. You cannot buy real estate that you already own. You cannot rent to a disqualified person. Unlike investment properties, the rules consider this Self Dealing, and it is strictly prohibited.

• Real Estate Income and Expenses – All income (rents or sales proceeds) that are produced by the Real Estate IRA must be returned to the IRA cash account. Expenses are treated the same way; all expenses must be paid by the IRA account. If the real estate is owned as a percentage, the IRA would pay the applicable percentage of the expenses.

• IRA Assets can finance purchases – If there is financing involved with an IRA asset, it must be nonrecourse financing (the IRA owner cannot personally guarantee the note). Typically, lenders will require larger down payments on nonrecourse loans. The lender can be the seller. Please note that there can be tax consequences of financing an asset inside an IRA account; UBITax can apply. The staff at Advanta IRA are well-versed in the particulars of financing an IRA asset.

• No Personal Use – Real estate owned inside an IRA account must be for investment purposes with no personal use. Also, if you visit that IRA property, you cannot write off the trip nor can you stay in the unit to do maintenance.

• Foreign Property does qualify – As long as it is investment property, the Real Estate IRA can purchase investments outside of United States.

To read the rest of our eBook, simply click the icon on the right to download it for free, or visit daveowens.com.

Additionally, if you found this post helpful and would like to speak with someone from our team, please feel free to contact us online or call our Fort Myers office toll free at 866-839-0429.

To your future,

Dave

Anyone who has an IRA, 401k, or any retirement plan is genuinely looking for the same thing, safety.  In the current, turbulent economic times we are now in, investment safety is not easy to find.  Many clients come to us looking for tangible safe investments.  They are looking for investments that they can see and feel regardless of whether or not the price goes up or down.  This is something they don’t get when investing with the stock market and a main reason why many of clients are turning to physical gold and silver instead.

Investing in physical Gold and Silver is beneficial for an IRA for several reasons:

1. Safety-Gold and silver has increased in value year after year since the early 2000’s.  The values have increased when the stock market was in decline and since then, it has started to increase.
2. Tangible asset-When clients purchase gold and silver through their IRA’s, the actual metals are purchased.  Whether it is bars or coins, the physical metals are purchased and stored typically at a depository.  Clients can take physical possession of their metals by taking a distribution.  If a client were to take distribution of metals, the depository would ship the actual metals to their desired location.
3. Value-If the market value of the asset goes down, clients still have a tangible piece of gold/silver in their possession. Unlike the stock market where your asset can decrease in value and you’re left with nothing.

Only certain metals and metals with a high quality of fineness are allowed to be purchased within an IRA.

Gold .995+
Silver .999+
Platinum .9995+
Palladium .9995+

Since the metals would be purchased with a Self-Directed IRA, the IRA holder cannot take physical possession of the metals while owned by the IRA.  Therefore most clients will have their metals stored at a Depository of their choosing.

For more information regarding Precious Metals IRA’s please do not hesitate to contact Advanta IRA Trust, LLC at 239-333-1031 or go to www.advantairatrust.com..

Advanta IRA does not sell any products or offer any investment advice. All information is for educational purposes only; please consult your tax advisor or CPA before investing.

With the recent volatility of the stock market, investors are looking for different ways to diversify their portfolios and are looking beyond the stock market to do so. Why not use your IRA to purchase real estate? The process begins by setting up an account with a custodian that will allow you to hold real estate in the IRA. You will then have to transfer funds into that self-directed IRA from your existing IRA custodian. Once your account has been funded and you have identified a property that you wish to buy, there are a few different ways to go about purchasing the property.

The first option is to use the cash in your IRA to purchase 100% of the property. When it comes time to close on the property, the contract would be in the name of the IRA and all closing documents would reflect the IRA as the buyer. Your IRA would be the sole owner and all income and expenses would flow through the IRA. Keep in mind that you will have to have enough cash within the IRA to not only purchase the property in full, but also maintain it until you decide to sell it. This includes paying any utilities, insurance, and tax bills as well as any bills associated with remodeling/improvements. In the same sense, if you decide to rent it out, all rental income will come back into the IRA as tax free profit!

If you do not have enough cash in your IRA to purchase the property in full, you can do a partnership, also known as tenants in common. Your IRA would purchase a percentage of the property alongside other investors such as other IRAs or personal funds, and can also include prohibited parties as long as they maintain their pro-rata interest. For example, your IRA could own 50% of the property and your spouse’s IRA could own the other 50%. Or your IRA could own 60% of the property and a friend could personally own the other 40%. You can split up the fractional interest however you like, but the most important thing to keep in mind is that all expenses and income must be split per those same percentages. So if your IRA owns 50% of the property, it would pay 50% of all bills and collect 50% of all rent or other income.

A third option is to buy real estate within your IRA with a mortgage. There are a couple of essential items to note when attempting to purchase real estate with a loan. The first is that the mortgage must be non-recourse. A non-recourse loan is a secured debt that is safeguarded by a pledge of collateral, but for which the borrower is not personally liable. Therefore, if you were to ever default on the loan, the bank could only come after the property and not your IRA. Most traditional banks do not offer these types of loans, however, there are banks out there that will; it is just a matter of finding them. The typical down payment for a non-recourse loan is 30-50%, so it is important to make sure you have enough funds in your IRA to cover the down payment when looking at properties that you are interested in purchasing. It is also important to know that in order to obtain a mortgage with your IRA, it is usually required that the property that you are purchasing has rental income. The IRA will own 100% of the property subject to the mortgage, so therefore all income and expenses must flow through the IRA. This includes the expense of the monthly mortgage payments.

As you can see, there are a few different ways you can go about purchasing real estate within your IRA. It is just a matter of figuring out which option is best for you and your investment goals. It is a great investment alternative if you are looking for something other than the typical stocks, bonds and mutual funds. Whether you decide to use cash, a mortgage or a partnership, purchasing real estate within your IRA is a great investment to look into!

To learn more about Self-Directed IRA’s and taking control over your retirement please contact the professionals at Advanta IRA Trust at 239-333-1031 or visit www.advantatrust.com.

Advanta IRA does not sell any products or offer any investment advice. All information is for educational purposes only; please consult your tax advisor or CPA before investing.

A Hedge Fund is typically structured as a general partnership or limited partnership. The IRA will receive a K-1 at year end. Please note UBIT tax can apply if the hedge fund is borrowing money to invest.

AdvantaIRA Trust administers and custodies hedge funds in self-directed IRAs. Each fund manager will set the investment minimum for their funds. Investors in Hedge Funds should have sophisticated investment knowledge before getting started in one of these funds. Many funds require that you are an Accredited Investor to get in the Fund. Please be sure to consult your tax or financial advisor before investing in hedge funds.

Contrary to popular belief, the IRS actually allows a much wider range of investment options than just your traditional stock, bonds and mutual funds. With the day to day roller coaster that is the stock market, many people are exploring using a Self-Directed IRA and the alternative investment options this provides. Through a Self-Directed IRA, investors are able to truly take control of their retirement and invest in what they know best and fully understand. Typical investments held within a Self-Directed IRA include:

• Real Estate
• Notes/Mortgages
• Private Stock
• LLC’s and LP’s
• Physical Precious Metals
• Futures & Forex
• Tax Liens

With this range of investment options available, there has never been a better time to take back control over your retirement. Let’s say you are a Real Estate Investor or Realtor, most likely you have a much better grasp on the real estate market over the stock market. Why not use that knowledge and invest your retirement funds in what you are most comfortable with. Self-Directed IRA’s allow an investor to take complete control of their own investment portfolios.

Understanding your range of investment options that a Self-Directed IRA affords you is the first step to taking total control over your retirement. If you are ready to take control and make your own investment decisions instead of relying on another person, it may be time to consider a Self-Directed IRA.

To learn more about Self-Directed IRA’s and taking control over your retirement please contact the professionals at Advanta IRA Trust at 239-333-1031 or visit www.advantairatrust.com.

Advanta IRA does not sell any products or offer any investment advice. All information is for educational purposes only; please consult your tax advisor or CPA before investing.

This is the second installment from “The eBook – Real Estate IRAs Made Easy”, which can be downloaded for FREE from www.daveowens.com.

The IRA administration industry is dominated by stock brokers and banks.   Both of these groups will do free IRA administration, but only because it helps generate revenues in other ways.  Stock brokers charge commissions for buying their products.  They might also charge management fees for the financial advice they are giving you.   In the case of many of their products, there are fees that might be considered “hidden”.   When you buy that $20 mutual fund, there is a good chance you really put $19 into the fund and the remaining 5% is used to pay the salaries of the fund managers.   Similarly, Banks will do free IRA administration.  They allow you to “invest” your IRA in one of their products.  Perhaps you invest in a CD that pays 1%.   The bank then loans that money out at 5-8% to generate their profits.

A Self-Directed IRA administrator allows you to invest in what you want without paying for the advice of a professional.   You are making all the decisions.    You can have a self-directed IRA at a stock brokerage where you can make the investment decisions yourself.  However, your choices of investment types are limited to the products that they sell.   However, a truly self-directed plan does not limit your choices.

At AdvantaIRA Trust, our clients are paying us to do the required IRA administration rather than to sell them investment products or give them financial advice.  Because we do not benefit from what type of investment they choose, we allow for a much broader range of choices.   Assets such as Real Estate, Notes, Gold, Private placements can all be held in an IRA.   You don’t need a special IRA.  You need a special administrator.  Banks and stock brokerages do not allow you to invest in these assets with your IRA.  Number one, they don’t know how to make any money on that type of transaction.  Number two, they don’t want to deal with the nuances of additional paperwork such as property tax bills, deeds, closings, etc).   At Advanta, we are set up specifically to deal with these “non-traditional” assets.

Self-Direction is not for everyone, but if you want more control of your investment choices, it might be the perfect choice for you!

Prohibited Investments:  There are two investments that you are not allowed to acquire in an IRA and those are Life Insurance and Collectibles.  Life Insurance is prohibited because it benefits your heirs, whereas the IRA benefits YOU when you retire. Collectibles are not allowed as it is difficult to determine a value for them. Some examples of collectibles are:

• Works of Art
• Rugs
• Antiques
• Metals other than certain Gold, Silver, Palladium
• Gems
• Stamps
• Coins
• Alcoholic Beverages

 Disqualified Parties: These include your lineal ascendants and descendants (mother, father, daughter, son, grandchildren) fiduciary of the plan, anyone that provides services to the IRA (CPAs, Attorneys, etc), spouse of the lineal ascendants and descendants and the IRA holder’s spouse. However it is acceptable to conduct activity within your IRA with aunts, uncles, cousins, and friends.

 Prohibited Transactions: Some common examples of these types of transactions are:

• No Self-Dealing which means you cannot loan yourself money from your IRA and your IRA cannot buy or sell property from you personally and vice versa.
• Your IRA cannot loan money or purchase/sell an asset from or to a disqualified party member.
• Clients who own Real Estate make the most common prohibited transaction which is paying for expenses personally instead of from their IRA. Anything associated with the property (taxes, bills, and HOA dues) should be paid out of the IRA.

Finally, your IRA is meant to benefit YOU when you retire. Once you understand the basic guidelines set forth by the IRS, it is easy to conduct your investments accordingly, so don’t get discouraged! Watching your money grow tax-free in your IRA leaves you feeling very rewarded and gives you a peace of mind that you’re prepared for retirement.

To learn more about Self-Directed IRA’s and taking control over your retirement please contact the professionals at AdvantaIRA Trust at 239-333-1031 or visit www.advantairatrust.com.

Advanta IRA does not sell any products or offer any investment advice. All information is for educational purposes only; please consult your tax advisor or CPA before investing.

Congratulations Doug on the great work!