Real Estate From Costa Rica – Answering Your Private Money Questions

This is the first in a series of videos where I’m answering student questions from Costa Rica. If you happen to miss any on this blog, you can always find the videos on our YouTube channel. You can find today’s video here at any time: http://www.youtube.com/watch?v=TsTSB3NZBIY

Question #1:
“Can you purchase and own a personal residence in your IRA?”
- Mike L. Denver, Colorado

Though I gave my answer in the video, I went ahead and asked Amy Sheflin, Marketing Coordinator at Entrust New Direction IRA, so that I could provide a more thorough response. Amy replied:

Chris,

The answer to the question is, unfortunately, no. The IRS does not permit personal use of real estate owned by your IRA.

This is one of the top 5 pitfalls of IRA-owned real estate on our real estate landing page:
http://newdirectionira.com/purchasing-investment-property-with-ira-401k/

The asker may also be curious about content here, which details how you can purchase a home and then eventually distribute that asset to yourself in retirement. Once you have distributed 100% of the asset (the IRA no longer owns any of the property), you could live in the property. As long as the IRA owns even a small fraction of the property, however, personal use of the property would not be permissible.

http://secondhomes.newdirectionira.com/

Hopefully that helps!

Amy Sheflin
Marketing Coordinator

Entrust New Direction IRA, Inc.
1070 W Century Dr Ste 101
Louisville CO 80027-1657

Question #2:
“I have a chance to buy numerous properties for 30 cents on the dollar. I have tried banks and hard money lenders but to no avail. Where can I find private money lenders to finance the deals in return for 50% partnership?”
- Yuri G., New York

Per my video response, I don’t like equity partnerships unless they are your absolute last resort. It’s a very expensive way to fund a deal, and it is very difficult to keep both parties happy. If you are unable to obtain private money for your deal using the property as collateral along with standard terms (points and/or interest), I would look closer at what the problem is. Is the price of real estate particularly high in your area, making it more difficult to obtain private funding? Are you really getting a great deal? In other words, if a lender thinks a property is worth less than you do, it may not look safe to them. Always be conservative with your values to make sure that you don’t get involved in a deal that really isn’t a deal. Also, how hard have you tried? How many lender prospects have you spoken with and actually presented a deal to? If that number is low, I’d go back to that before considering an equity partner. Have you been to a local REIA group and asked who is lending private money? Have you spoken to some hard money lenders? Even hard money may be cheaper than an equity partnership! Consider all avenues before giving up a huge piece of your profit. Last, always remember that if your deal is good enough, there will always be someone willing to fund it! You just have to keep asking people until you get the answer you want. YES!

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