Invest Your IRA/401K
Most IRA custodians don’t allow for “non-traditional” types of investments such as foreign real estate. It’s not that you can’t use your IRA funds to invest in real estate overseas, but often your custodian doesn’t want you to. This is either because he doesn’t want (or understand how) to deal with the required paperwork or, more often, because he makes more money if you invest in one of his preferred investment products.
To buy real estate, foreign or local, with your retirement funds, you can set up what’s called a “self-directed IRA” or “self-directed 401(k).” In theory, this means you’re in a position to “direct” the investment of your account funds. However, you still must go through the custodian, asking him to make the investment for you. He can refuse. Depending on what you want to do, sometimes the only way to take control of your IRA funds is to establish what is sometimes referred to as a “checkbook” IRA. To do this, you set up an account with a self-directed IRA custodian that allows non-traditional investments. Then you create an LLC (I’d recommend an offshore LLC if your intention is to purchase foreign real estate), in which your IRA invests all its funds. Then you, as the managing member of that LLC, invest the funds of your IRA as you like (keeping in mind that you still have to follow the IRS investment rules, such as no “self-dealing”).
This structure allows you to eliminate the paperwork and review process otherwise required each time you invest in something “alternative.” You simply write a check from the LLC’s bank account to make the purchase. Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 28 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring and investing overseas in her free e-letter. Her newest book, How To Buy Real Estate Overseas, published by Wiley & Sons, is the culmination of decades of personal experience living and investing around the world.
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