Quick Facts About Investing in Mexican Real Estate Through an IRA
Did you know you can increase returns on your pension savings by purchasing Mexican real estate through a self-directed IRA? The majority of us invest our pension automatically and do not pay attention to the rate of return that the plan is generating. With this alternative investment, you can take control of your retirement. U.S. citizens can increase returns on their investments by making the right choices and reduce fees and administrative costs payable to brokers and advisors.
The IRS allows foreign real estate as an alternative investment; provided you follow the rules set out by the IRS, it is essential that you are aware of these regulations before you make your acquisition.
When buying property through your retirement plan, remember that its only purpose is to generate income or realize a capital gain for your retirement — investing in a future retirement home by buying property at today’s price, meanwhile preparing for a better quality of life during your retirement.
The rules and regulations are complicated, but MexLaw has the experience and the competence to assist you through the entire process, beginning in the U.S. to closing in Mexico, including ongoing accounting services.
Investment property purchased through an IRA is not meant to be enjoyed right now, investors can not utilize the property as their residence or as a vacation home, nor can it be rented out to a disqualified person which includes the account holder, their spouse, ascendants or descendants. The law does not explicitly include brothers and sisters as disqualified individuals. Disqualified persons also include individuals that provide services to the IRA such as your custodian, your attorney, CPA, and financial advisor.
IRS rules state that you cannot directly benefit from an asset owned by your IRA. It is strictly prohibited for you to engage in transactions that, directly or indirectly, will benefit you. You can rent the property out to an unrelated party, the rental income is tax-deferred inside your IRA, and then you may claim the home as your own when you take your final IRA distribution. Your IRA can sell the property at any time. You cannot lend yourself money from your IRA nor can you pay yourself a salary or fees for managing the property. In this case, a property management company would care for your property, providing you with a worry-free investment.
You may consider investing in large developments utilizing other investors’ IRA as well; another option is to have friends and family invest in your Mexican LLC as shareholders.
If you participate in a prohibited transaction as described above, your IRA will be de-registered, and it will be treated as though the property was distributed and you will have to pay the tax on that distribution. If the IRS considers this a distribution, it can also impose a tax equal to 100% of the amount involved.
Learn how to increase your returns, protect your investment, and proceed with this type of investment without causing a tax event by discussing the process with a qualified lawyer at MexLaw.