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How to Eliminate Taxes from All of Your Real Estate Deals

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After completing a successful real estate transaction, do you ever wish a chunk of the profits didn’t have to go back to the IRS for taxes? Do you ever dream about how many more real estate deals you could do or how many more properties you could buy if profits weren’t split with the government because of taxes?

Dream no more. Realizing tax-free or tax-deferred profits on real estate and alternative asset investing is a reality.

Government sponsored retirement plans such as IRAs and 401(k)s allow you to invest in almost anything (including real estate), not just stocks, bonds and mutual funds. And all the benefits those plans provide — tax-deductions and tax-free profits — apply to whatever investment you choose, including real estate.

The Power of Tax-Deferred and Tax-Free Profits in Real Estate
One of an IRA’s greatest features is that it allows Americans to enjoy the true power of tax-deferred compounding interest. Compound interest occurs when interest is earned on a principal sum along with any accumulated interest on that sum. In other words, you are earning interest not only on your original investment sum, but also on the interest earned from the original sum.

By taking advantage of an IRA’s tax-deferred status, you do not have to pay tax immediately on your earnings (like the sale of a property or rent collected). Thus, you are able to enjoy the power of compounding on ALL of your profit, not just what is left after taxes.

For example, if you were to contribute $4,000 a year to a tax-advantaged account (an IRA) and assume an 8 percent compound interest rate of return for 30 years, your self-directed IRA would be worth $449,133 at the end of year 30. If you made the same investment in a non-tax sheltered environment (a brokerage account), assuming a 31 percent tax rate, it would be worth $286,752 instead of $449,133.

That is 43 percent less, a difference of $162,381. As you can see the effect of taxes on your savings can be dramatic.

Now apply those benefits to your real estate investing. Tax-deferred profits on your real estate transactions allows greater flexibility to make more investments, or to just sit back and watch your real estate investment grow in value, without worrying about taxes.

Is This for Real?
Most investors don't know this opportunity exists because most IRA custodians do not offer truly self-directed IRAs that allow Americans to invest in real estate and other non-traditional investments.

Often, when you ask a custodian/trustee, “Can I invest in real estate with an IRA?” they will say, “I've never heard of that” or, “No, you can’t do that.”  What they really mean is that you can’t do this at their company because they only offer stocks, mutual funds, bonds, or CD products. 

Only a truly self-directed IRA custodian like Equity Trust Company (will allow you to invest in all forms of real estate or any other investments not prohibited by the Internal Revenue Service.

Is This Legal?
It sure is. Since 1974, Equity Trust Company has assisted clients in increasing their financial wealth by investing in a variety of opportunities from real estate and private placements to stocks and bonds in self-directed IRAs and small business retirement plans. Currently, Equity Trust has more than 130,000 clients and has $11 billion under custody management.

There are a few prohibited self-directed investments such as artwork, stamps, rugs, antiques and gems. All other investments, including stocks, bonds, mutual funds, real estate, mortgages, and private placements, are perfectly acceptable as long as IRS rules governing retirement plans are followed.

Getting Started
“Is it hard to do?” is a common question about investing in real estate with a self-directed IRA. It is really simple and very similar to the way you currently invest in real estate. In no time at all you can be investing in real estate and other alternative assets receiving tax-free or tax-deferred profits for the rest of your life.

The main difference between self-directed investing and general investing is that you and your IRA are two separate entities, and as such, everything related to your investment (the property deed, property insurance, etc.) needs to be titled in the name of your IRA and not you personally. Also, all profits or expenses generated from the investment must come from and to the IRA, not your personal funds.  

Self-directed IRA custodians such as Equity Trust are passive, which means they cannot give investment advice. But if this type of account sounds like the right move for you, account representatives are available to talk to you about your options and how they fit with your current situation.

Equity Trust Company is the leading self-directed IRA custodian. For more information about self-directed IRA investing, the plans and services available to you, and how to get started, visit http://www.TrustETC.com/RealEstate or call 1-888-ETC-IRAS.


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