Potts Financial Blog
This blog is being written for informational and educational purposes only. It is not intended to provide individual or professional advice, and is intended only for people who have Traditional Individual Retirement Accounts and/or rollover employer retirement accounts and want to purchase real estate.
When Someone Tells You:
Real Estate IRAs Are Complicated!
Today I want to address a common concern I hear about Real Estate IRAs: Real Estate IRAs are Complicated!
Because our world is changing and information is moving at warp speed, information can move around the globe in a nanosecond. This environment has led us to an increase in professional specialization. A professional can specialize in retirement plans, financial planning or estate planning. Because of the complexity of these financial fields, a professional advisor understands their limits in terms of specialized knowledge, time, and the ability to be all things to everyone.
Investment firms that promote and sell equity investments do not include Real Estate IRAs in their business model. They promote and focus their client education on the selling and buying of equity investment to all IRA holders. When an IRA holder asks an equity IRA advisor about Real Estate IRAs, the advisor tells the IRA holder - “It’s complicated!”
Because of our years of commitment to Real Estate IRAs, they are not complicated to us. In 1974 Congress enacted Employee Retirement Income Act (ERISA), which allows an individual to have an IRA and the IRA holder can invest in stocks, bonds, mutual funds, precious metals, real estate and other approved investments.
The rules and regulations for Real Estate IRAs mirror those of Equity Investment IRAs. The contribution, investment, accumulation and distribution guidelines are the same and your IRA custodian has the same reporting responsibilities, whether you invest in real estate or equity investments.
The difference is that Real Estate IRAs require a special set of knowledge, planning and risk management skills. Financial advisors can attend individual schools for not only estate tax law but also income tax and ERISA mandatory distribution law. However, there are not any schools that teach how these laws interact and how real estate affects this interaction. So when they tell you, “It’s complicated!" You may find that, it is only complicated to them.
Alan N. Potts a Chartered Financial Consultant is located in Tallahassee, Florida. He can be reached at 1.800.525.1893.