USING A RETIREMENT ACCOUNT (IRA) TO INVEST

Using a Retirement Account (IRA) to Invest

Optima Real Estate - Auction, Tax deed & Investment

Tax deeds and tax liens are approved as eligible investments for IRA retirement accounts. You can use this type of real estate investment to earn tax-free retirement income on a tax-deferred basis, which is reinvested in your IRA.

In the future, Optima plans to offer help to investors who wish to invest using a self-directed IRA. At the present time, if you wish to use your IRA to invest in tax deeds and tax liens with us, you should first consult with your tax advisor.

Here are some things you might find helpful about IRAs and how they can be used with tax deed investments.

Under the Employee Retirement Income Security Act (ERISA) of 1974, IRA holders are allowed to self-direct their funds into many different types of investments. Traditional stocks and bonds are included, but so are less conventional investments such as real estate, hard-money loans, overseas rental properties, and tax liens. In fact, the only types of investment explicitly forbidden to IRA’s are life insurance and collectibles.

Two types of IRA’s can directly invest in tax liens: “self-directed IRA’s” and “real estate IRA’s.” While self-directed IRA’s can invest in tax liens, they are somewhat limited because they usually have to approve transactions through a custodian before releasing funds. Some investments need to confirm payment within a very short period of time. Investors in tax deed auctions, for example, sometimes need to complete fund transfers within 48 hours. This limitation can sometimes be worked around by transferring funds in advance into an escrow account, which can then be used to quickly provide the funds needed to cover an auction purchase.

A real estate IRA uses a different approach by setting up a customized limited liability company (LLC) over which the IRA holder has “checkbook control.” This means that the IRA owner can write checks directly from the LLC account to purchase eligible investments. When tax liens are involved, for instance, the IRA owner is able to write a check immediately after a successful auction bid.