Real Estate

Real Estate is a Popular Investment Choice

Many investors feel comfortable investing retirement funds in real estate. Real Estate Opportunities gives every investor a chance to go beyond their ordinary income. In fact, Real Estate income has long been regarded as a source for a reliable passive income. Many investors have already experienced owning a piece of land or a home and are familiar with details of the purchase transaction.

So It is not a big leap to use real estate assets as investments. You too can become a real estate investor and make viable investments in real estate. Retirement savings plans have always been allowed to own real estate, but few custodians offered the service. This is where Camaplan steps in – we can help you make Real Estate assets a part of your portfolio.

Camaplan helps investors explore real estate options. Your CamaPlan self-directed account can invest in a wide range of real estate, including single- and multi-family homes, apartment buildings, co-ops, condominiums, commercial property, vacation properties and unimproved land. Camaplan helps you make smart investment decisions in Real Estate deals.

The investment can seek to generate monthly income (steady income) or be held for appreciation. Invest in a vacation property or even a rental property using your Self-Directed IRA. Plus, Set your own investment strategies. There are no limits on how long your account owns the real estate property; it can be flipped immediately to lock in a quick profit or held long term as it appreciates in value. You may improve or rehabilitate property to increase its value.

Summary of Advantages

Real Estate investing makes sense. Listed below are all the potential benefits from investing in real estate through your CamaPlan account:

  • Compound interest – The power of compound interest is multiplied in tax-advantage accounts, such as Self-Directed IRAs.
  • Reduction of taxable income – The investor gets tax benefits too, since the income or earnings from the investment flow back to the tax-deferred account.
  • Asset protection – Cama self-directed retirement accounts and assets owned by an account are protected by statute from seizure by most creditors.
  • Estate planning – Benefit your family’s financial future with estate planning that leaves valuable IRA assets to loved ones without the burden of taxes.
  • Additional reading on Investment Options is available in The Resource Center.

Invest in Real Estate

Eligible Properties

Your IRA may invest in:
Single-family residences and vacation homes
Condominiums and duplexes
Commercial properties (retail/office/warehouse)
International properties

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Real Estate Partnerships

Your account can purchase property in partnership with other parties, including yourself (using funds outside your retirement accounts), another person (including disqualified persons), and/or another person’s retirement accounts. In such an arrangement, your account would only purchase and hold title to that portion or percentage of the property paid for or financed. The other entities would hold title to the remaining portion. All profits and expenses of the property must be allocated to the parties according to the ownership percentages. If you obtain a personal loan to partner with your account, that loan cannot be secured by the property.

Prohibited Transactions

The IRS does not specify the type of private placements that can be made by tax-advantaged savings accounts; it only specifies investments you cannot make. Refer to IRS rules and regulations for complete information on prohibited transactions, including its definition of disqualified persons. The structure and form of your private placement can also vary depending on the type of Cama account you open (see Plan Types). Here are general limitations regarding real estate investments:

  • Your account may not purchase property from, or sell or rent property to, yourself or any disqualified person. You may not turn it into a rental property to earn rental income from a disqualified person.
  • You may not use the purchased property for personal benefit or the benefit of a disqualified person (for example, as an office or vacation home).
  • Property expenses, including taxes, insurance, and any repairs made, must be paid from funds in your account or income generated by the property.
  • “Sweat equity” (personal labor to improve the property) is also not allowed; repairs must be performed by a non-disqualified person and paid for from funds in the IRA.

Finance the Purchase

While paying 100% of the purchase price and real estate transaction costs with funds from your CamaPlan account is the easiest way to purchase real estate, the IRS does allow the purchase to be financed. Here are the guidelines:

Non-Recourse Loan

Any financing received must be extended as a non-recourse loan – i.e., the lender must agree to seek no other assets or monies from the Cama account in the event of default except title to the purchased property. The financed debt, like other property expenses, must be paid with investment funds from the account or income generated by the property. The loan should also meet these requirements:

  • The amount may not exceed 70% of the property’s value.
  • The term cannot exceed 30 years.
  • Adjustable rate mortgages are allowed.
  • The property must have a minimum Income/Expense Ratio of +1.25.
  • The account must contain three to six months of cash reserves equal to finance payments and anticipated expenses.

Required Documentation

To execute the financed property purchase, you must provide the following transaction documentation:

  • A completed loan application
  • The sales and purchase contracts
  • The account’s financial statement
  • A certified appraisal of the property
  • A 12-month income statement for the property

Financed purchases are generally not allowed for:

  • Mobile Homes
  • Time Shares / Condo Hotels
  • Certain Restaurants
  • Residences w/5+ acres
  • Farms

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