Investing in Real Estate with IRA Funds

Many people don’t realize that the IRS does not prohibit you from putting real estate in your IRA. You can actually use a Traditional IRA, Roth IRA or SEP-IRA when it comes to investing in real estate. However, there is a very strict set of guidelines that you should follow if you choose to invest in real estate within your IRA.

The rules are complicated, and you risk voiding the tax-advantaged status of your IRA if you violate them. This could mean hefty taxes and penalties.

Among the rules are the following key points:
1)You are not allowed to purchase property that you already own in your IRA.
2) Generally, you can’t buy property from your spouse, children, parents or grandparents.
3) You are not allowed to personally benefit from the property--in other words, it must be for investment purposes and you cannot live in or personally use the property.
4) All the income from the property must be re-invested back into the IRA.

These are just a few of the general guidelines. It is important to note that there are various ways to structure a real estate IRA that may allow the investor to accomplish specific objectives that might not otherwise be possible.

This article was reprinted with permission. Bob Priest, MBA, CFP, is a Certified Financial Planner. He can be reached toll free at 877-Bob-Priest, or visit his website at www.BobPriestFinancial.com. All opinions are that of the author.