The LMC Group Blog

June 11, 2009 – 9:44 AM
William L. Martin III
Property values are down — even the very desirable properties along the 30A corridor in South Walton are distressed. For many investors in those properties, who don’t have the wherewithal to wait for the inevitable recovery, these are painful times. But for others, the declining values represent one word: Opportunity. Now may be a good time to buy, but what if you don’t qualify to invest in one of these dream properties at distressed prices? Some people are using their IRAs as vehicles to purchase a future retirement home or just to make an investment in what they consider to be distressed properties.
You can invest IRA money in a wide range of investments, including stocks, bonds, mutual funds, money market funds, saving certificates, U.S. Treasury securities, promissory notes secured by mortgages or deeds of trust, limited partnerships and real estate. That includes houses, condos and office buildings.
IRA money is limited to “investment” property. It cannot be used to buy your own residence, or any other property in which you live. But when you retire, you can direct your IRA to turn it over to you as a distribution, at the current market value.
For example, Joe Investor has all of his money in an IRA worth nearly $550,000. The money is invested in stocks and bonds. Joe currently owns his own house outright, but eventually wants to retire and live in South Walton. Joe finds a beautiful short-sale home in Blue Mountain Beach for $300,000. The home had previously been listed for $1.0 million and the deal is too good for Joe to resist, but Joe can’t qualify for a mortgage on an investment property.
Joe’s solution is to convert his IRA into a real estate IRA. Joe opens a self-directed IRA, rolls over the entire amount of his old IRA into it.
Joe then directs his IRA trustee to make the purchase of the Blue Mountain Beach home with the IRA becoming owner.
Joe’s IRA can rent out the Blue Mountain Beach home for tax-deferred income. Joe will eventually sell his current home as he approaches retirement. And now Joe is excited about retirement because he knows that the IRA will turn the Blue Mountain Beach house over to him as a distribution once he reaches his golden years.
The rules governing real estate IRAs are strict: The house or property must remain in the trust until distribution at retirement. It must be treated like any other investment. You cannot manage the property. But a third party such as a real estate broker or property management company can be hired by the IRA trustee to manage the property.

Bill Martin is an attorney whose practice focuses in bankruptcy, real estate, construction, uniform commercial code, contract, and commercial litigation, including breach of contract, employment law and securities fraud.

Not a bad view from the new LMC group’s office.  We are now set up to take our cusomters on the River to tour our communties by boat.  Swing by and check us out.  We are on 1550 point harbor road just accross from PPD down town.

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