How to Use IRAs to Invest in Offshore Real Estate
As a general rule, IRAs are not set up to invest in property. There are, however, certain cases in which you can use your IRA funds to buy a number of offshore properties without incurring early withdrawal penalties or fees. This is a fairly unknown option, which means you can use it to land some great deals if you know where to look.
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Instructions
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Invest in Offshore Real Estate
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Make sure you have a "self-directed" IRA account. If you don't, you will need to convert to one before investmenting in real estate, especially when it involves offshore property.
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Find an IRA custodian or investment company that specializes in offshore investment. This is a relatively new option, so many companies may lack experience in the field. Don't settle for working with somebody without experience, as this can be a complicated system.
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Look for a company with international representation. You will do much better investing your IRAs with a company that has dealings in place with offshore corporations. Whether they are associated with foreign investment corporations or directly with real estate agencies, they can move the process along faster if they know where to go from the beginning.
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Be ready to reinvest all your earnings. Whether you are buying a hotel, a house or a building, any income you make from the property (from rent, reselling or other means), must be either put back into the same place or sent to your original IRA account. If you withdraw these earnings or decide to use them for something else, you will incur penalties or lose your deferred tax benefits.
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Keep in mind that neither you nor your family members can use the offshore property you invest in. This means you cannot buy a house using your IRA if you plan on using it as a holiday destination for a few months each year. You are also not allowed to rent it to family members, either as a private property or as a business setup.
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Tips & Warnings
When you buy offshore property using your IRA funds, the government considers the investment to be an asset to your retirement account, rather than a withdrawal from your IRA. This allows you some freedom that is highly beneficial during the business deal.
