How do I structure and use my Self-Directed IRA to buy and manage real estate?

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You can use an IRA LLC to purchase real estate with checkbook control. If you are planning to rent the property, you should also make sure to register your LLC with the state government.


What are common real estate investments in a Self-Directed IRA

Common real estate investments include rental properties, rental vacation homes, multi-family housing, commercial real estate, private REITs, and real estate investment syndicates. 

How does the IRA/LLC structure work?

Real Estate Basic IRA Flow (1)

How does checkbook control help me control my assets?

With the checkbook control structure, Rocket Dollar sets up a workflow for you to have more control over your asset custody. Your IRA becomes the 100% investor in your new IRA LLC, of which you are then the manager. Rocket Dollar does not go out and purchase and manage the asset for you, Rocket Dollar empowers you to have full control over how you direct investments. 

  1. Avoid lengthy and tedious deal reviews - you simply approve the real estate investment as the manager of the LLC, so no hassling Rocket Dollar to get your real estate fund to approve deal paperwork. 
  2. You retain more control over the assets. As manager of the LLC, you have the final say in how to utilize and deal with the asset without a third party interfering. Process small things like writing a check to a contractor or scanning a rent check into the bank app with your checkbook bank account without having to call Rocket Dollar or ask for permission. 
  3. No per investment fees - Because of the streamlined approach of the IRA LLC, you simply pay one monthly fee ($15 for Silver and $30 for Gold) no matter how many different real estate investments you make in the account.


How do dollars go to an from my real estate investment?

  1. Your retirement funds get rolled into the IRA, and Rocket Dollar helps them get to your IRA LLC bank account so that you can deploy those dollars.
  2. When you are buying the property, you can send a wire or write a check from your new IRA LLC bank account at our partner bank. If it is a fund, send them the dollars, but make sure are legal documents of title or investment subscription documents are titled in the name of your new IRA LLC, which will be first initial, last name format such as  "WNelson RD LLC"
  3. Rent payments go back into the bank account at our partner bank or can stay in the property or real estate fund investment indefinitely. As long as you are paying the Rocket Dollar subscription fee, you are not charged minimum balance or activity fees!
  4. If you want to sell your property, do so, and then return your dollars to the IRA LLC Bank account. 
  5. Your retirement account balance is now hopefully higher and can be used for distributions from rent or profits from the sale to fund your retirement — all without capital gains. 

Finally, make sure to record the value of your investment in the Rocket Dollar investment tracker.


How should I set up my LLC Ownership of the real estate?

Once you have a tenant moving into your property, you should make sure you are properly registered in the state your property is in. This is because, as a landlord, your IRA is technically running a business. All business activity, even those inside IRAs, should be registered with the local state authorities. 

You have two options. Use only your Colorado LLC, or 

I only want to use my Colorodo LLC or use as few LLCs as possible...

Some investors are fine using the Colorado LLC to own the asset. They will also register the Colorado LLC as a foreign entity doing business in the state once they have tenets in a rental property. You can read more about it in this article about registering your LLC as a foreign entity.


What if I want a local LLC and one for each property? 

Other investors, especially those that buy multiple properties or with a complex ownership structure, tend to open additional LLCs in the state their rental properties are located in. 

You can read more here about how someone would open a local state LLC instead of registering your Colorado LLC.


Which structure should I choose?

Some investors want the simplicity of just having one LLC. It is true that having a multitude of LLCs can bring some extra paperwork and headache. Investors with just one or two low liability risk properties in the same state tend to favor this model. 

When we communicate with the most experienced real estate investors, they usually prefer to have an LLC for each property or each "project" of similar properties in the same area or state. Although there are more LLCs to create, the accounting of each property is always extremely clear for current and future records. The liability of each property is also split with LLC law protections so that some real estate investors feel they can argue in court or contention that properties are at less risk of a legal risk if a legal challenge hits one of their IRA's properties. Experienced real estate investors, especially those intending to buy two or more properties, or any properties with liability risks tend to favor this model. 

You can review our webinar on this topic on Asset Protection. 

Brendan and Jonathan Feniak discuss the issue, and the primary factor is the amount of risk and liability for each real estate property.


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