Using a Self Directed IRA to purchase Costa Rica Real Estate

Most people who have an IRA with an insurance company, traditional investment company or bank, do not realize that those institutions are paid by the mutual fund companies to push clients into certain mutual funds. You, in turn, are charged fees, usually by both the mutual fund and the financial institution. However, there is another way to invest your IRA and that is in a self-directed IRA.

Who can open a self-directed IRA? The rules are the same as any other IRA. You can also open a self-directed IRA account if you have a balance in a 401(k) from a previous employer.

In a self-directed IRA YOU are in 100% control of where your investments go and you have the ability to purchase Costa Rica real estate with your IRA with no penalities.

Why don't most investors know this? Because if you were to ask the custodian of your IRA to invest in Costa Rica real estate they would not do it because they are not allowed to. The reason why they are not allowed to invest your funds there is because developers do not pay institutions for new clients (like mutual fund companies do).

Paradise Brokers has experience in using self-directed IRA's. We have personally done it ourselves and have many clients who have used their IRA's to purchase Costa Rica real estate.

Below are a few limitations as to what is allowed and not allowed when using a self-directed IRA.

Prohibited transactions

Some types of self-directed transactions violate the basic intent of your IRA, and subject your account to risks and penalties. In discussing this, we define a 'transaction" as the means of moving funds into your retirement account and using the funds in the account for your self-directed investments. These transactions include contributions, purchases, sales, and distributions.

Your retirement plan is intended to benefit you when you retire, and not before. Transactions that can be interpreted as providing immediate financial gain to self-directed account holders are not allowed. This type of transaction is otherwise known as "self-dealing."

For example, IRA holders may not:

• Borrow money from their IRA
• Sell, exchange or lease property to their IRA
• Receive unreasonable compensation for managing property in their IRA
• Use their IRA as security for a loan
• Transfer plan income or assets to disqualified persons
• Lend money to disqualified persons
• Extend credit on their IRA to disqualified persons
• Furnish goods, services, or facilities to disqualified persons
• Allow fiduciaries to obtain or use the plan's income or assets for their own interest.

For IRAs or 401(k)s, a disqualified person is:

• The IRA holder and his or her spouse
• The IRA holder's ancestors, lineal descendants, and their spouses
• Investment advisors and managers
• Any corporation, partnership, trust, or estate in which the IRA holder has a 50 percent or greater interest
• Anyone providing services to the IRA, such as the trustee or custodian

Life insurance is not a permitted investment for Individual Retirement Accounts. Please refer to IRS publication 590 for more information.

Prohibited holdings

In addition, direct investment of your self-directed IRA funds in collectibles, which include works of art, rugs, antiques, metals other than gold and palladium bullion, gems, stamps, coins (except certain U.S.-minted coins), alcoholic beverages, and other tangible personal property as may be defined by the Secretary of the Treasury is prohibited.

To learn about how to open an account please contact Paradise Brokers.