subject: Can I Buy My House With My Ira? [print this page] You can invest your IRA in real estate, but there are some considerations to keep in mind. The IRS prohibits investing your IRA in life insurance policies and in collectibles like art work, sports memorabilia, gems, and so forth. Investing your IRA in real estate is not an easy journey, and there are some possible pitfalls to avoid.
You first need to create a self directed IRA. You also need to have an independent custodian for that IRA. Check around; you can use brokerages, trust companies and other financial institutions.
Doing a web search for "self directed IRA custodians" can help you locate some. Check into their services and fees so you know exactly what you will be getting. Make sure to find out what their insurance coverage is - you want your assets to be 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.
