ANNAPOLIS, DAVIDSONVILLE, EDGEWATER, ARNOLD, SEVERNA PARK, CROWNSVILLE, REAL ESTATE

Investors are still shaking off the memory of watching what happened to their IRA stock portfolios during the nightmarish global financial crisis. Even the groggy recovery that’s been under way ever since has featured the kind of stomach-churning drops that drive investors to the Pepto-Bismol.

So it’s not surprising that some have been searching for alternative assets that could grow tax-free within their retirement accounts. And lately I’ve been hearing from more clients who are asking about the possibilities in real estate, including Annapolis second homes and even vacant acreage.

You read that right: real estate is a little-publicized yet entirely legal vehicle for IRAs! Right now, when prices are at bargain-basement levels, investing for the long run in what many see as the most ‘real’ of all holdings certainly is an opportunity worth looking into. Nevertheless, there are some big cautions.

First off, let me emphasize that my area of expertise is real estate — not financial advice. Anyone who is serious about placing real estate in their IRA will absolutely need expert financial and tax advice.

They will explain that traditional IRAs cannot include real estate; only ‘self-directed’ IRAs are eligible (although they are fairly easy to open or steer existing IRA assets into). When you ‘self-direct’ an IRA, you are subject to some very firm prohibitions. In the case of a real estate investment, just one of those is that you can’t use the investment (for instance, if you purchased one of our Annapolis second homes) for your own benefit until you retire. In other words, your pretty little cabin by the lake can be rented out, but you or your family can’t spend the weekend there. You also can’t hire yourself (or a company you own) to manage it. And if brother Fred wants to vacation in it (even if he would pay rent for the privilege), you have to tell him no.

The general idea is the same as with any IRA: you or family members cannot benefit from account assets until you retire. That makes perfect sense, because the funds used in it have been contributed tax-free, and any gains are appreciating tax-free. Still, if you can secure a non-recourse loan, that might allow you to effectively double your investment dollars.

The penalties for not following the rules make that not worth even thinking about. That means that most everyone will probably want to use an administrator or custodial firm with real estate experience. But for those who find second homes or other income-producing Annapolis properties, the prospect of building a tax-free revenue stream within a self-directed IRA is certainly intriguing. It could mean the Pepto-Bismol stays on the medicine shelf.

I hope you will think of me whenever you decide to discuss the current prospects for any Annapolis real estate investment. I’m standing by!

I specialize in waterfront, luxury homes, new construction, and relcoation in Annapolis, Davidsonville, Edgewater, and surrounding communities.  Let me know if I can help you gather the information that you need to make informed real estate decisions. 

DEBORAH LAGGINI, Long and Foster Real Estate, Annapolis, MD 21403

CELL 410.991.6560

EMAIL [email protected]

REALTOR, Annapolis, Davidsonville, Edgewater, and Surrounding Communities

REAL ESTATE, Waterfront, Luxury Homes, New Construction, Relocation