Buying Real Estate for Your IRA

There is an IRS provision that will let you buy real estate for your IRA

Are your IRA contribution dollars hard at work? If not, you will want to learn more on how you can invest some of your IRA money on real estate.

Considering the economy and Wall Street performance lately, you might want to hear more about this.

Here's a summary on this option…

First, you’ll need to find a retirement plan custodian that will allow real estate investments inside your IRA and ask them how you can get started.

Average banks and brokerage firms typically put limits on your investment choices to allow stocks, bonds, mutual funds, CD's, and maybe annuities inside your IRA.

However, Section 408 of the Internal Revenue Code will allow you to purchase land, residential property, commercial property, real estate contracts, or trust deeds, with money from common types of retirement plans, such as a standard IRA, SEP, Roth, even a Simplified Employee Pension account.

Your retirement plan custodian might even allow a leveraged or foreign piece of property as well.

Since buying real estate typically requires greater funds than you may have available in your IRA, you would have the option of buying just the interest of the property in joint ownership with other individuals, such as your spouse, friend, family member, or business partner.

Unfortunately, IRS regulations states the property in your IRA cannot be your primary residence or vacation home.

Another drawback to be aware of is, you cannot add any real estate you already own into your IRA. Review the Internal Revenue Code section 4975 carefully as this discusses more info on prohibited transactions.

The title of the real estate must be registered in the name of your IRA plan custodian for your benefit. An example oft this title would be… Retirement Services Company, Custodian FBO Brad Pitt IRA.

Generally speaking, there are a few additional costs involved and might vary per custodians. Each custodian may also offer different flexibility and services related to the account and property. Taxes and property maintenance of the residence or land would also be handled by yourself, unless you pay for these services separately. Information about the property maintenance and taxes certainly fall outside the scope of this article so I recommend you carefully and thoroughly research this from professionals.

Purchasing real estate for your IRA may provide an above average return on your entire retirement portfolio. However, due to the complexities you should discuss all options with a tax advisor and financial planner before you commit to a piece of real estate.

Read more articles about Financial Planning and get your IRA onto the fast track to retirement.