Should I Buy My House With My Ira?

It is possible to invest your IRA in real estate

, but there are some things you should consider. The IRS does not allow investing your IRA in life insurance or collectibles such as art work, memorabilia or gems. Using your IRA to invest in real estate is possible, but not necessarily easily done.

First off, you need to create a self directed IRA. You also need to get an independent custodian for that IRA. There are trust companies, brokerages and other financial institutions that will do this, so check around.

You can do a search on the Internet for "self-directed IRA custodians". Compare prices and check into the reliability of the company as well as their insurance coverage. You want to make sure your assets are well protected.

Some custodians will also help you with other investments, such as stocks and bonds or mutual funds, others will not. Make sure you know up front exactly what services they provide. Make sure you understand the rules of the investment.

Some custodians will offer rent collection and other services. Others won't and you'll need to make other arrangements. You should probably avoid high maintenance real estate for this kind of investment.

Don't forget there are other things to consider as well. Your IRA can't buy any property that will be used as your residence or as your vacation home. You also can't rent, buy or lease any property from your spouse, parents or children.

If the property is mortgaged, most of your gains will still be subject to taxation. You could also loose any tax break advantages given to homeowners. You'd better consult a tax pro before doing anything like this.

These are some of the things to consider when deciding to invest in a self directed IRA. Before making your final decision, remember to figure in the costs of having a custodian and property management, as well as any changes in your taxes. Also, if you will be needing cash soon, this option may not be the best for you.

by: John Coktostin

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