Q: What exactly is the relationship between your company (S.A.F.E.), the Facilitator/Administrator and the Custodian in the transaction I am considering?
A: S.A.F.E. is primarily a marketing and sales organization that consults with owners of IRA’s to consider certain options in the investment arena. We are not Registered Representatives, nor do we give advice as to your IRA or Retirement Funds. We have relationship with licensed professionals in real estate, mortgages and other ancillary industries to assist our clients in gaining education as to what choices they may have in the market.
A Facilitator/Administrator simply facilitates. Often time they are CPA’s or investment counselors or Registered Representatives. They are not connected with our business nor we with theirs. They bring the ingredients of the transaction together to assure that the requirements of the IRS are met and fulfilled with every transaction. They cannot recommend investments nor endorse companies.
The Custodian is an FDIC institution that collects the funds once they are Self Directed and disperses to the Seller that the Owner of the fund requests. They may be a bank or escrow company or other FDIC member.
In short – S.A.F.E. is the marketing company – we help you find property that fits your needs nationally as well as internationally. The Facilitators gather the information. The Custodian collects and disperses the funds. None of us are in business together nor can we be. Each transaction must have ARMS length
Q: How do I actually buy real estate in/with my retirement plan?
A: First, we work with you to find the real estate within the parameters of what you have in your plan and budget. We apprise you of what mortgage instruments are available to assure that you are educated in the wise use of leveraging your purchase. Non-recourse financing is sometimes used, while at other times typical recourse financing is necessary.
Second, you make the decision to move ahead. We then introduce you to what we believe to be the most adequate Facilitator for your transaction. Please be aware of the following: we are not a Facilitator nor an Administrator.
Third, the Facilitator then follows your directions and contacts an FDIC Custodian to handle the money flow.
Fourth, the escrow will fund as required.
Fifth, on closing the title is vested as shown in the closing documents depending on what the Facilitator of the transaction requires. The FDIC Custodian assures that the money passes through from your retirement account to the seller and that ARMS length is kept intact throughout the process.
Q: What do I do if I don't have enough money to buy real estate in my IRA?
A: You may partner with yourself or others; you make allowable contributions; you may obtain debt financing through private sources or financial institutions on a non-recourse basis; You may arrange a seller carry back loan; you may sell other assets in your IRA to raise cash to make the purchase; you may transfer funds from other IRAs or rollover funds from qualified plans, such as 401(k), 403(b) or government 457 plans you may have had at employers where you no longer work; If you have a profit sharing of 401(k)plan where you currently work, you may be able to make in-service withdrawals and roll those to the IRA within 60 days.
Q: Where can I get a loan for real estate purchases using my IRA?
A: We, at S.A.F.E., have multiple outlets for financing both for non-recourse as well as typical recourse financing. Different types of transactions require different types of financing.
Q: How do I buy foreclosed property using my Qualified Plan?
A: Foreclosed property is purchased from the lender directly by directing the purchase through the trustee of the qualified plan. The plan makes the payment to the lender and the property is then vested in the name of the trustee of the plan for your benefit. Pre-foreclosures are negotiated with the owner of the property, as in any property purchase. The debt is paid out of escrow, and the property is then placed in the qualified plan for your benefit, as above
Q: I have a 401(k). I can I invest that in real estate?
A: Your 401(k) plan may, at your direction, invest in real estate if the investment provisions of the plan permit it. If the employer contributions to your plan have been made, and the plan permits self-directed investments, there will be rules to the amount you may invest from that portion you are vested in.
You may also have an Individual (k), which limit participants to owners only, plus spouses and partners, you may decide on the investments to be completely self-directed by you.
Q: Is there any liability to my retirement plan holding real estate?
A: You always face liability whether your plan is an IRA or qualified plan, such as a 401(k) plan. If, for example, your plan owns real estate and a person is injured on that property, the plan or IRA would have the same liability issues that you would have to deal with, if owned property personally. Your IRA or plan could also avail itself of protections, such as insurance, or having the IRA or plan purchase a 100% interest in a properly crafted limited liability company or similar entity, which then acquires the property. Limiting liability for assets in your IRA or plan should be discussed with competent professionals, such as attorneys.
Q: If I have further questions, what is my next step?
A: There are a myriad of other questions that may surface for you and your family.
Contact us here at Secure Asset Funding Expert and we’ll do our professional best to answer your questions in regards to real estate purchase (be it commercial, residential, fractional, vacation home or any other) and expose you to the possibilities of leveraging your purchase with a mortgage that makes good sense.
If your question falls into another realm, such as the mechanism of Self Directing your IRA or other retirement questions, we’ll refer you to a qualified party that services that realm of the business.
Whatever your question – we’ll be there to assure that you are properly educated and in the position to make the wisest decision for you.
