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If you are thinking of buying real estate with Roth IRA funds, let me give you a little advice. Choose the right custodian. There are many examples of a rolled over IRA successfully purchasing real estate, but the fees charged by multiple custodians can make a big difference.

# 1 – Undvested Cash Balances

Once you start buying real estate with Roth IRA funds, you will almost always have some cash in your account. In fact, you must have some cash there, because all costs associated with maintaining the property must come from the account.

Don’t think the custodians don’t know this. They take advantage. There is a large company that takes 45% of your earned interest on uninvested cash balances from you each year. They call it a maintenance fee, but there is no additional maintenance involved. No matter what is kept within the account, the same type of maintenance is required.

# 2 – Additional Charges

When it comes to an IRA accumulated to buy real estate, you will need to have a self-directed account. You tell your custodian to write a check for a purchase. Some companies charge for writing checks. They charge for transferring titles and deeds or mortgage promissory notes. They charge a fee each time you use the account to make a purchase or sell a property. All of these fees can add up to thousands of dollars in one year.

When talking about an IRA accumulated to buy real estate, one of the biggest advantages for investors is the ability to keep more of their earnings, due to the tax-free environment of the account. But if a custodian charges numerous fees, they don’t get that much.

Similarly, one of the biggest advantages of buying real estate with Roth IRA funds is that you will “never” pay taxes on those earnings. Your contributions are taxed as regular income. There are no capital games or income taxes on earnings made within the account. Qualified distributions are never taxable.

# 3 – Annual maintenance fee and reasonable installation charge

If you have a transferable IRA, the real estate purchase can only be accomplished if you choose a custodian who offers the option. Those companies that currently offer “free and easy setup” do not offer the option. They are stock brokers and charge large fees to buy and sell stocks.

A reasonable installation fee is $ 50. The annual maintenance fee depends on the total value of the account. If you’re like me, you’re looking for a million dollars or more buying real estate with Roth IRA funds. Trust me, it’s not an impossible dream.

# 4 – get an education

If you are inexperienced when it comes to buying real estate in a transferable IRA, get education and information first. There are a small number of companies that offer “hands off” investment options. That might be the best option right now.

As you learn more about buying real estate with Roth IRA funds, you can do more. But, start slowly, just to be safe.

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