The Buying Process
Financing
Using Retirement Fund
Retirement fund contributions within the U.S. can be redirected to an international real estate investment. IRA's allow over $40K annually of contributions to go directly to Costa Rican real estate. The IRS rules for doing this are straight forward and allow for a lot of opportunity. While using common sense will steer you clear of any violations, it is always best to speak to your accountant to ensure that you get the most out of using a retirement fund to purchase Costa Rican real estate. Within your IRA, one can buy, sell or trade real estate. You can form partnerships with friends, family or associates as well. One can roll property from one plan to another or take property from your plan as a distribution.
Sometimes people form investment groups that will combine IRA and non-IRA funds to buy real estate in Costa Rica. Your IRA can also be invested in private stock offerings, LLCs, loans, purchase options, joint ventures and tax liens certificates. Buying your property with the IRA can allow you to improve the diversification and security of your retirement money, significantly reduce the tax burden on your gains, and free up resources to be invested.
To purchase property in your IRA:
- Create a purchasing contract with your IRA named as the legal owner of the property which you are choosing to buy.
- Contact your IRA administrator and make the initial deposit on the property with IRA money, or set up to pay cash yourself and get reimbursed by your IRA.
- There are several forms needed to close the deal, make sure your real estate lawyer, the broker, the escrow company and any other who is involved with the purchase can be in direct contact with the IRA administrator.
- Have your lawyer send a Buy Direction Letter to the administrator with a list of directives for acquiring the real estate.
- Once all forms requested by the administrator to be completed are finished, send a copy of the contract along with the paperwork.
- The contracts for purchasing Costa Rican real estate will then be signed by the administrator as he or she is acting as an official for the IRA. Before signing, the administrator will check contract terms against the Buy Direction Letter for consistency.
- By wire transfer or printed check, the deposit will be sent to the seller or their attorney.
- Then the IRA administrator sets up a wire transfer into the escrow account that will buy the real estate.
- From here on out, any profits are usable as cash in your IRA. They will be invested in the manner laid out in the Buy Direction Letter.
