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Does anyone have any experience or knowledge with respect to purchasing real estate (specifically in C.R. in my case) through a self directed IRA account. I’ve read tidbits of information here and there that suggest it is certainly doable. My IRA is with Schwab but Schwab does not allow a self directed IRA to hold “non-traditional” assets (real estate etc.) so I guess there are other firms that do provide that type of service but I’m not familiar with those. Any guidance to suggestions to help me get started exploring this is appreciated. Thx.
I just purchased some beachfront property in Fl using my 401k. I transfered the funds into a trust account with Pensco in SanFrancisco. They hold the property in trust for your IRA
We have two comprehensive reports in our Download Library which are normally only available to our Premium member:
1. A 30 page ‘Buying Costa Rica Real Estate With Your IRA’ Ebook was written by Tom Anderson, the President, CEO & Founder – PENSCO Trust Company. This fact-filled report published in April 2010 will give you practically all the information you need. Free to Buenos Amigos VIP Members or US$19.95 to non-members.
2. Using Your Individual Retirement Account (IRA) to Purchase Property in Costa Rica by Roger A. Petersen – Attorney at Law. September 2009
I will make these available to you for free until 6pm my time so get over there quick and download them…
The Download Library is here:
[ https://www.welovecostarica.com/members/programs/opendownloads.cfm ]
Scott Oliver – Founder
WeLoveCostaRica.comPS. You can see what’s included in the Premium membership at:
2 questions
I cut the following from the Pensco article
While it is legal to purchase real estate in any country or even on the moon,
PENSCO will only allow investment in countries that are generally democratic
and that use English in their documents or which will translate their documents to
English. Examples include the U.S. Virgin Islands, England, India, New Zealand,
Australia, South Africa, Ireland, Mexico, and Canada, among many others.I assume that since you used their article that they have acted as trustee for purchases in Costa Rica?
Also are there lenders willing to loan money on a non recourse note on Costa Rican properties
Thanks
I pestered Tom Anderson for about six months to give me that report which was ‘hot-off-the-press’ and exclusive to WeLoveCostaRIca.com for a while when we first published it…
Confirmed – My friend and Attorney Roger Petersen along with PENSCO have helped numerous Americans to buy real estate in Costa Rica.
Unless you are a legal permanent resident of Costa Rica, finding a lender to buy/invest in anything is very difficult.
Scott
PS. You’re welcome!
[quote=”johnf”]2 questions
I cut the following from the Pensco article
While it is legal to purchase real estate in any country or even on the moon,
PENSCO will only allow investment in countries that are generally democratic
and that use English in their documents or which will translate their documents to
English. Examples include the U.S. Virgin Islands, England, India, New Zealand,
Australia, South Africa, Ireland, Mexico, and Canada, among many others.I assume that since you used their article that they have acted as trustee for purchases in Costa Rica?
Also are there lenders willing to loan money on a non recourse note on Costa Rican properties
Thanks[/quote]
As a Costa Rica Attorney, I can confirm the PENSCO, Entrust, and Sovereign IRA Fund Managers all permit use of IRA funds for the purchase of real estate in Costa Rica. The general conditions for the use of the IRA funds, are that the real estate purchase be for investment purposes and not for the personal use of the principal IRA Account holder, that only IRA funds be used for the purchase and not a combination of IRA and personal funds, that the purchase be made through a Costa Rica corporation of which the IRA Fund Manager becomes the Custodian Shareholder for the purchaser’s IRA Account, and that the party in control of the investment owning Costa Rica corporation be a party other than the principal IRA Account holder, nor anybody related by blood,or marriage to the principal IRA Account holder (in other words, a trusted friend, or business associate would have to be appointed as the President of the registered corporate owner of the investment property).
“The general conditions for the use of the IRA funds, are that the real estate purchase be for investment purposes and not for the personal use of the principal IRA Account holder.”
This is the problem; investment is the key word not for personal use of the IRA .
warren
Hello
One to thing before even thinking about using your IRA to buy
real estate in Costa Rica.This only applies if you are at least 59.5 years of age.
I think the individual may be confused and may be assuming that the IRA is WITHDRAWN to make the purchase in Costa Rica.
Any early withdrawal/distribution of the the IRA before age 59.5 triggers penalties. This is known as the 59 1/2 rule. See the details below. In fact when the IRA purchases in Costa Rica the IRA is NOT withdrawn, The funds and anything it purchases (including real estate) are still owned by the IRA through its Custodian.
It is the same when a Custodian purchases one share of stock and then sells it to purchase another one. In this case the funds were not withdrawn, the Custodian simply changed the assets. It is the same when the Custodian of the IRA purchases Real Estate which is held and owned by the IRA fund for the benefit of their client.
In purchasing real estate in Costa Rica or anywhere in the world for that matter the main guidelines that the individual purchasing with an IRA fund must be aware of is that it does not constitute a Prohibited Transaction. See below for the definition of a Prohibited Transaction.
/Early Distributions/
You must include early distributions of taxable amounts from your traditional IRA in your gross income. Early distributions are also subject to an additional 10% tax
[ http://www.irs.gov/publications/p590/ch01.html#en_US_publink1000230930 ], as discussed later.*Early distributions defined.* Early distributions generally are amounts distributed from your traditional IRA account or annuity before you are age 59½, or amounts you receive when you cash in retirement bonds before you are age 59½.
Age 59½ Rule
Generally, if you are under age 59½, you must pay a 10% additional tax on the distribution of any assets (money or other property) from your traditional IRA.
Distributions before you are age 59½ are called early distributions.
The 10% additional tax applies to the part of the distribution that you have to include in gross income. It is in addition to any regular income tax on that amount.
/Prohibited Transactions/
Generally, a prohibited transaction is any improper use of your traditional IRA account or annuity by you, your beneficiary, or any disqualified person.
Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).
The following are examples of prohibited transactions with a traditional IRA.
* Borrowing money from it.
* Selling property to it.
* Receiving unreasonable compensation for managing it.
* Using it as security for a loan.
* Buying property for personal use (present or future) with IRA funds.*Fiduciary.* For these purposes, a fiduciary includes anyone who does any of the following.
* Exercises any discretionary authority or discretionary control in managing your IRA or exercises any authority or control in managing or disposing of its assets.
* Provides investment advice to your IRA for a fee, or has any authority or responsibility to do so.
* Has any discretionary authority or discretionary responsibility in administering your IRA.
*Effect on an IRA account.* Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year.
This from Attorney Roger Petersen.
Scott
The above post is correct. I have been aware for years about this issue.
What kills using your IRA to purchase and land, house or building is as Scott wrote;
The following are examples of prohibited transactions with a traditional IRA.
* Borrowing money from it.
* Selling property to it.
* Receiving unreasonable compensation for managing it.
* Using it as security for a loan.
* Buying property for personal use (present or future) with IRA funds.warren
I am considering an INVESTMENT opportunity in Panama and received this info today from the company soliciting the investment. I have not heard back yet from my US-based CPA, so I can’t attest to the validity of the information, so it is presented below solely for your consideration….
crb[b]All the World’s Investments in Your Retirement Plan[/b]
A retirement plan is now the only way a U.S. person can own offshore funds tax efficiently and make buying or selling decisions about those funds. This is a consequence of an obscure provision of the U.S. tax code that imposes draconian interest charges on tax-deferred dividends or capital gains from most offshore funds.
Your retirement plan can invest in raw land, office buildings, mortgages, even tax lien certificates, both inside—and outside—the USA. An international business. Your retirement plan can own interests in one or more international businesses, as long as this interest doesn’t exceed 50% of the total value of all classes of the businesses’ corporate stock.
Any international business is permitted, so long as it’s not carrying on activities contrary to U.S. law. For instance, your retirement plan could own up to a 50% interest in a company with an offshore website that sells books, tapes, medicinal herbs, or just about anything else.
It doesn’t matter for U.S. tax purposes how the business is organized—as a partnership, international business company or other entity. All profits attributed to your retirement plan accumulate tax-free, safe and secure, until you actually receive the profits in the form of a distribution from your retirement plan.
What’s more, with a Roth IRA, you can actually gift your retirement plan’s interest in the offshore business to your children or other beneficiaries, free of any U.S. tax obligation, other than estate tax.
There are considerable asset protection advantages in moving the assets into a retirement plan offshore. That’s because when your retirement plan purchases offshore investments, while your U.S. custodian remains responsible for complying with IRS reporting requirements, the assets are now held by a non-U.S. entity that is under no obligation to comply with the orders of a U.S. court. In many countries, it is against the law for the holder of an asset to comply with a foreign court order!
There Must be a Catch… Actually, there are a few eminently reasonable ones:
You must have a self-directed IRA, 401(k) or pension plan, or be able to convert your current retirement plan into a self-directed plan. If you don’t have one, it may be possible to “cash out” of your current plan and reinvest it in a self-directed plan. There is no U.S. tax liability if the funds are reinvested in a tax-compliant retirement plan within 60 days.
No self-dealing is permitted. For instance, you can’t lend yourself money from an IRA and then use it to invest in your own business. However, there are numerous exceptions to the self-dealing rule.
You can’t benefit from the investments in your plan until you actually retire.
You won’t be able to credit foreign taxes you pay against your U.S. tax liability, since this income is tax-exempt in the U.S. The countries you invest in will all have their own tax laws, and your retirement plan income is only tax-deferred in the U.S. However, with foresight, you can often mitigate or even eliminate these taxes.
Distributions from a U.S. retirement plan don’t benefit from the 15% tax rate for dividends and capital gains. Instead, when you cash out, you’ll pay tax on the income at your marginal tax rate—which may be substantially higher than 15%. However, it’s often possible to plan distributions so that they take place in years when income from other sources is minimal. And of course, if you’re taking distributions from a Roth IRA, there’s no income tax to worry about at all.
[quote=”watchdog”][quote=”johnf”]2 questions
I cut the following from the Pensco article
While it is legal to purchase real estate in any country or even on the moon,
PENSCO will only allow investment in countries that are generally democratic
and that use English in their documents or which will translate their documents to
English. Examples include the U.S. Virgin Islands, England, India, New Zealand,
Australia, South Africa, Ireland, Mexico, and Canada, among many others.I assume that since you used their article that they have acted as trustee for purchases in Costa Rica?
Also are there lenders willing to loan money on a non recourse note on Costa Rican properties
Thanks[/quote]
As a Costa Rica Attorney, I can confirm the PENSCO, Entrust, and Sovereign IRA Fund Managers all permit use of IRA funds for the purchase of real estate in Costa Rica. The general conditions for the use of the IRA funds, are that the real estate purchase be for investment purposes and not for the personal use of the principal IRA Account holder, that only IRA funds be used for the purchase and not a combination of IRA and personal funds, that the purchase be made through a Costa Rica corporation of which the IRA Fund Manager becomes the Custodian Shareholder for the purchaser’s IRA Account, and that the party in control of the investment owning Costa Rica corporation be a party other than the principal IRA Account holder, nor anybody related by blood,or marriage to the principal IRA Account holder (in other words, a trusted friend, or business associate would have to be appointed as the President of the registered corporate owner of the investment property).[/quote]
I am in the process of completing the type of purchase you may be looking at and I used ENTRUST to set up the IRA. I also have Schwab and I simply transfered funds from Schwab to Entrust. Like the man siad, it must be a purly investment property and you should get expert advice on all the details.
What part of CR are you interested in?Great info, but I am still a little confused. So I open a self directed IRA, invest in property and build a house on it, and rent it until I am 60. What happens then? Am I allowed to move into it and take possession? What are the tax consequences? I know with a reg IRA I can take out an amount every year (after 59 1/2) if I want and only get taxed as it affects my income. If I move into the house, am I taxed for the full value of the house?
I am sorry if this has been talked to death, but this last part confuses me. Thanks!
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