How to Use Your IRA for Real Estate Investments

Posted almost 6 years ago. 7 helpful votes

Email

1

Reduction of taxable income

Investments in IRAs benefit from tax-deferred profits or in some cases tax-free profits.

2

Types of Real Estate

Investments can be made in raw land, single family homes, apartments, mobile homes, commercial real estate, real estate notes, mortgages and tax liens. The IRS prohibits "self dealing," which are investments in which you or your family members or lineal descents have prior ownership, e.g. personal residence, retirement home or office. You cannot purchase real estate from a corporation, partnership, or LLC which you currently own. However, your IRA can invest in a newly-formed limited partnership, limited liability company, C-corporation or land trust that will purchase real estate.

3

OwnershipTitle

When purchasing an asset for your IRA, it must be properly titled to your IRA trust company as custodian for the benefit of you. You need a IRA trust company to serve as your real estate IRA custodian because the IRS does not permit you to personally "touch" your self-directed IRA account.

4

Funding

When purchasing an investment (or any portion of an investment) for your IRA, funds must come directly from your IRA. The IRA trust company will send the funds directly to the seller or his agent, per your instructions.

5

Expenses/Income:

Any expenses associated with your IRA investment must originate in your IRA account and any income must be remitted to your IRA account. Rental payments are remitted to the IRA trust company for the benefit of your IRA. You may use funds from your IRA to renovate property.

6

Signatures

Documents for your IRA investments must be signed by the IRA trust company.

Additional Resources

For further information regarding real estate IRAs, see http://www.wny-lawyers.com/pamphlets.php

Buffalo, NY Real Estate Attorneys

Rate this guide

Can't find what you're looking for? Ask a Lawyer

Get free answers from experienced attorneys.

 

Ask now

25,498 answers this week

3,218 attorneys answering