Using IRAs to Buy Investment Property

With property prices rising,it may be a good idea for some to invest IRA funds in real estate in order toearn a fair rate of return while deferring taxes.

When using an IRA to buyinvestment property, only business property can be bought and it must be a newpurchase that goes directly into the IRA. If buying rental property, you would need to open an IRA custodialaccount and transfer money into it from an existing IRA account.  You also have the option of buying andselling real estate in a self-directed IRA to enjoy tax-deferred or tax-freeprofits, but there are limits on the number of yearly transactions.

Investors should beconcerned about having enough money in the IRA when purchasing properties, astraditional mortgage loans are unavailable. Investors should also be aware of the administration costs of an IRA,the inability to write off losses or depreciation, and the tax penalties thatwill ensue if any rules are broken.

SeeLeonard Baron, How to Use Your IRA to BuyInvestment Properties, Forbes, June 7, 2013.

Special thanks toJim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringingthis article to my attention.