draw $10,000 from your IRA to assist them as long as they’re a first-time homebuyer themselves. Roth IRA A Roth IRA is an individual retire- ment account funded with after-tax money. The rule exemption when using a Roth IRA is a little different from a traditional IRA. Aside from being first-time homebuyers, your account needs to have been open for at least five years, counting from the 1st of January of the year you made your first contribution. Once you have with - drawn the amount to fund your pur - chase (a limit of $10,000), you need to use the funds within 120 days. For additional exemptions refer- ence IRS code 72t distributions. Self-Directed IRA (SDIRA) This type of retirement account holds a variety of alternatives that are normally prohibited from usual IRAs. The account is directly man- aged by the account holder, which is usually administered by a custodian or trustee. This may be a bit complex when compared to its counterparts, that’s why this is best suited for
experienced investors. You can convert your regular IRA into an SDIRA to invest in a wider variety of properties. This means that you are not just limited to houses, but can also invest in vacant lots, mobile homes, apartments, or multifamily properties. However, the biggest concern when utilizing funds from an SDIRA account is that it cannot personally benefit you . What does this mean? You’re not allowed to personally use the prop- erty to benefit from it. You and your family aren’t even allowed to use it or live in the purchased home. This is because the account itself owns the home. Using personal funds or sweat equity (personal time) to benefit from the property is prohibited as well. Based on its limitations, this is ideal when purchasing rental prop- erties. As long as you’re purchasing a piece of real estate that’s not in- tended for personal use, you can use your SDIRA to fund the purchase. On the flip side, once you turn 59 ½ years old, you could take a distri- bution from the IRA then live in the same house as your personal home. Depending on the properties that you plan to purchase, you’ll need to
have enough funds in your IRA to purchase it. Remember that these funds still play by the IRA rules and are not accessible until age 59 ½. If you’re still doubting whether you should use your IRAs to fund your purchase, worry not. Using an IRA to fund real estate purchases is usually conducted by experienced investors. You need to do your due diligence, and connect with the right profes - sionals. Don’t hesitate to ask as many questions as you can! That being said, if you feel like this is the right choice for you make sure to partner with the best people in the business. •
Michael Jordan is the founder and President of Strategy Properties in Michigan. Michael started his first company at the age of 19, while still a student-athlete on a full scholarship to
play basketball at the University of Detroit Mercy. Following two years of NCAA tournament play, Michael transferred to the University of Michigan to pursue a degree in Business Management. He founded Strategy Properties, Inc. in 2003 (under the name Jordan Ventures, Inc.) with a primary focus on the construction of new homes throughout Wayne County, Michigan. Since then, Strategy Properties has become a key provider of rental homes in Detroit and Southeast Michigan.
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