Foreign Real Estate Investments in Your Self-Directed IRA

The most common investment in a self-directed IRA is real estate. IRA owners who are successful in these ventures reap the benefits of healthy and steady returns on their investments. Some of this income is gained by rehab-and-flipping properties or buying at a low cost and selling for a higher profit without spending money on renovations. Other ways your retirement plan can achieve wealth within the real estate realm is through rental income, investments in commercial property, improved or unimproved land, tax liens and certificates, and by extending private mortgages for those looking to invest in their own options or homes. Foreign real estate investments present unique opportunities, too.

Many of these same investment types can also be made in offshore real estate. Using a self-directed IRA, you are able acquire foreign real estate investments that can help build wealth toward retirement. Additionally, if your IRA doesn’t have the funds to acquire the asset(s) you wish, you can still partner funds and even utilize non-recourse loans to reach your goals.

Whether you wish to develop raw land for townhomes, a neighborhood, a tourist attraction, or simply to purchase a home that you rent out—your choices are vast when you self-direct your IRA.

Real estate acquisitions in foreign countries occur very much like they do here in the United States. However, different countries have varying rules and restrictions that affect buying as well as investing. It is critical that you perform exhaustive due diligence to protect yourself and your potential investment.

While we cannot provide the regulations imposed by every country, we can offer a list of questions you can use as a guide when seeking foreign real estate investments.

Get These Answers on Foreign Real Estate Investments You’re Considering for Your IRA

  • Does the country you’re dealing with allow property to be held and titled in the name of your IRA? Do they require you to establish a corporation or LLC in that country to hold the property?
  • What is the social / political / ecological environment in the country you are considering? These may be the most critical findings you seek that can positively or negatively affect the success of your investment.
  • What are the legal requirements for your moving money into that country? Typically you must have a bank account in the country you want to own a property in—for the purpose of paying expenses as well as depositing capital/income.
  • What are the tax requirements regarding foreign property in both the country you’re investing in as well as your own country? Taxes vary from country to country and can be quite complicated. Often, owning foreign property is beneficial to United States’ citizens, which is why the U.S. has begun to impose more strict laws regarding foreign assets. You must fully educate yourself in this area to avoid any unwanted tax implications down the road.
  • Who can you trust to manage your investment property? For instance, if rental properties in Tahiti are your plan—who can you trust implicitly to designate as the person to manage the elements this entails?
  • How do you determine real deals from scams? This process can be tricky especially if you aren’t working with someone you know…but, also even when you are working with someone you do know! Some scams are easily identified, others not so much. While a bit of trust, along with a wing and a prayer, is involved in every investment opportunity—performing due diligence in this category is imperative. It means the difference between the life and death of your investment.

The key take-away from this article isn’t the fact that you can invest in foreign real estate with your self-directed IRA—the key is that when you do, it is vitally important that you practice due diligence when considering these investments. Whether you’re considering investments closer to home and especially in foreign real estate, if you do not spend the time investigating the viability of every aspect of your options, you exponentially increase your risk of failing.

Due diligence is especially essential when considering offshore real estate investments in countries where you know no one, laws differ, and tax implications are complex. Societal, political, and environmental conditions matter. In fact, everything matters so it’s also important that you find a team of trusted advisors from a CPA to a financial expert and even an attorney who practices international law—as well as out-of-the-country counterparts—that can help guide your way to success.

If you have any questions regarding this article or wish to learn more about self-directed IRAs, please contact us.

About Jack Callahan

Jack proudly earned his bachelor’s degree in finance and multinational business from Florida State University and his law degree from the University of Florida College of Law. He established Advanta IRA in 2003 and has steadily nurtured and grown the company and the team every year since. Prior to founding Advanta IRA, Jack delivered specialized counsel to real estate investors, small business owners, and real estate professionals on tax, legal and financial matters. As an industry expert, Jack is a frequent speaker on self-directed retirement plans. He is an accredited continuing education instructor for the Florida and Georgia Bar Associations, Florida and Georgia Real Estate Commissions, and The American Institute of Certified Public Accountants.