GMAC Real Estate A Second Home can Help Fund Your Retirement
GMAC Real Estate

Articles & Resources

Specialty Real Estate

Real Estate Calculators

Room Planner

A Second Home can Help Fund Your Retirement

Takeaways

  • Self-directed real estate IRAs can become a part of your retirement planning.
  • This property must remain an investment held in trust by the bank.
  • Self-directed IRAs have a number of rules that must be followed.

Did you know?

  • Under tax law you do have limited use of your investment second home.
Real estate IRAs can be part of your retirement picture. If you are looking at second homes while pondering your retirement, most likely you are looking into buying a second home to eventually become your primary residence as you transition into a new phase of life. A second home purchase with an eye toward eventual retirement home status is a great idea. Of course second homes can offer more than a new residence down the road. Did you know second home real estate can help you fund your retirement? Among the many retirement plan options out there one possibility is a real estate Individual Retirement Account (IRA).

The retirement account variation known as a self-directed IRA allows the IRA holder to put money in a wide variety of investments such as stocks, mutual funds, bonds, T-bills and others. Real estate is included in allowable investments with a self-directed IRA. The self-directed IRA market is just getting rolling, and many banks won’t deal with a real estate IRA. If you are looking to buy a second home, it’s worth finding a bank that will accommodate a real estate IRA.



Know the Rules

Once you establish a real estate IRA, remember self-directed IRAs have stringent guidelines that must be met in order to keep the tax-free status of the account.

In the case of a real estate IRA, these guidelines include:

  • The real estate must be treated as an investment
  • Rental profits go to the trustee
  • The IRA holder cannot mange the property
  • The real estate, or proceeds from its sale, remain in trust until the holder’s retirement
  • If the trustee is directed to sell the real estate, the proceeds have to be reinvested in another retirement account.

According to the IRS, a second home can be used by the owner for 14 days in a year, or 10% of the days rented, and still be considered an investment property, and there are no limits to the number of your IRAs. This means you aren’t limited to just a second home. Real estate IRAs can provide you a third home, or even more.

Search for Second Homes for Sale

To search for a selection of second homes for sale, please visit lifestylehomesearch.com, or visit the website of a GMAC Real Estate Office that serves the area where you'd like to buy a second home. To learn more about buying Second Homes or Vacation Homes, explore the rest of this section, or contact a GMAC Real Estate Agent.