subject: Using IRA Real Estate Investments To Find Your Retirement Home [print this page] Using IRA Real Estate Investments To Find Your Retirement Home
It is well known that real estate is a profitable long term investment. IRA real estate investment uses your individual retirement account funds to invest in the real estate market. There are many rules that govern investments with your IRA so many people believe that they can't buy personal property. This is true, to a point. IRA homes investing are possible if you are careful, you can buy a retirement home with your IRA.
According to regulations, you cannot live in a property that is purchased with your IRA. You also can't rent the property to relatives, nor can you purchase commercial property to rent to your business. So, then how can you find your perfect retirement home and purchase it with funds with your IRA?
First you need to understand that a standard IRA can't invest in property. Standard IRA investments are limited to stocks, bonds, mutual funds or CDs. In order to have an IRA real estate account, you need to open a self directed IRA.
A self directed IRA is one where you have more control over your investment opportunities. This includes commercial and residential real estate, mortgages, deeds of trust, as well as standard investments, minerals, and commercial investing. There are additional benefits that often come with these types of IRAs, including lower fees, flexible cash flow and sometimes less red tape involved with making transactions. The trustee or custodian of the account makes the purchases and handles all transactions on behalf of the IRA in order to avoid breaking federal rules governing how these accounts are handled. Some investment firms that offer self directed IRA's offer IRA real estate advice while others give you complete control. This way you can be as involved with your retirement plan at your comfort level.
A benefit of purchasing your future retirement home with your current IRA is that you can take advantage of current real estate prices. That property that your custodian just purchased on behalf of your IRA can't sit dormant or that asset actually because it is a drain on your retirement account. How do you make it generate income without violating any regulations?
Second aspect of an IRA real estate investment is that just because you can't live there doesn't mean that your IRA can't own rental property. As long as you rent it to distant relatives or strangers you are not violating any regulations. The trustee will collect the rent and it will go into your IRA. The funds for any taxes or repairs must also come from your IRA account. As long as you don't mix your personal funds and IRA funds your transaction is viable. And an additional benefit is that the income your property generates is tax deferrable.
Depending on the type of IRA account that you have there are different tax aspects and when you can withdraw the funds or the property can vary. It is best that you consult an IRA real estate expert to make sure that you handle every transaction properly so you can retire to your beautiful new home.
