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How to Use Retirement Funds to Purchase your Dream Property in Costa Rica with a Tax Exemption.

Did you know that the money you have sitting in your retirement fund right now, could, in fact, be used to buy an investment property today with a tax exemption? 

There is a lot to consider with this type of investment and it’s important to educate yourself on the pros and cons before considering if this is the right option for you.  So, why buy a piece of real estate with a self-directed IRA LLC?

  • All gains are tax-free 
  • Positive cash flow is tax-free 
  • There is no time limit for holding property 
  • IRA can borrow money – Leverage your investment with non-recourse financing 
  • Potential to earn a larger rate of return on invested capital vs your current portfolio
  • A chance to invest in what you know and understand 
  • Diversify your retirement portfolio from over-exposure to Wall Street 
  • Protect your retirement funds from inflation or a falling U.S. dollar 
    • Invest your retirement funds in hard assets 

How does it work?

  • Set-up an IRS compliant “Checkbook Control” Self Directed IRA LLC with a financial group of your choice (with “checkbook control” you do not need to get each real estate investment approved by the custodian of your account. Instead, as the manager of the IRA LLC, all decisions are 100% yours).
  • Rollover existing retirement funds from current custodians to new IRA passive custodians.
  • IRA passive custodian transfers rollover retirement funds to newly established IRA LLC bank account at a local bank.
  • Identify the real estate investment property for purchase.
  • As manager of the IRA LLC, purchase the real estate investment property by writing a check or executing a wire transfer from the new IRA LLC bank account. No need to seek the consent of the custodian with a Self-Directed IRA LLC with “Checkbook Control” solution.
  • Title to the real estate investment property and all transaction documents should be in the name of the newly established IRA LLC. Documents pertaining to the property investment must be signed by the LLC manager.
  • All expenses paid from the investment property go through the IRA LLC. Likewise, all rental income checks must be deposited directly into the IRA LLC bank account. No IRA related investment checks should be deposited into your personal accounts.
  • All income or gains from the real estate investment will generally flow through to the IRA without tax!

This could include investing in:

  • Raw land 
  • Residential homes 
  • Vacation Rental homes such as Villas, Houses or Condominiums
  • Apartments 
  • Duplexes 

Purchasing an investment property with your IRA can provide many useful benefits but there are key points to understand. We encourage all of our guests to consult with a financial custodian.   Don’t know where to start or have a property in mind? Contact our HRG Concierge Team at +506 2637 8484 or write to us online and we can help direct you.