You can keep real estate in your IRA, but you'll need a self-directed IRA. Any real estate property you purchase must be strictly for investment purposes; you and your family cannot use it. Buying real estate within an IRA generally requires paying in cash and the IRA must pay for all property expenses. An IRA is a powerful financial planning tool that allows you to save for retirement or provide tax-advantaged benefits to your heirs.
Additionally, you can also invest in a Gold based IRA to diversify your retirement portfolio. Most people invest their IRA funds in stocks, bonds, and mutual funds. However, others opt for non-traditional investments, such as real estate, in the hope of increasing their returns. While the idea of keeping real estate in your individual retirement account sounds good and may offer higher returns than stocks or bonds, the process has some pitfalls and pitfalls. Annual contribution limits still apply, so if you don't have enough money in your IRA, you can't just invest more to cover the purchase.
To purchase real estate within a retirement account, you must first set up a “self-directed IRA” with a custodian. Once you've established the IRA, you can use it to purchase virtually any type of real estate, including vacant land, single-family and multi-family homes, commercial properties, cooperatives, and condominiums. When you buy real estate through your individual retirement accounts, you can invest in any type of real estate. This includes rental properties, untreated land, and even commercial properties.
You can also invest through real estate investment trusts (REITs) or by issuing a mortgage promissory note. Another fairly common buying method when it comes to money from an IRA is a joint tenant association. Due to annual contribution limits, many people, especially if they are younger, may not have enough cash accumulated in their IRA to buy the property they want. There are also rules that prohibit the purchase of an asset that you or your family already own (see Prohibited Transactions).
You can use your IRA to get a no-recourse loan to buy investment properties or hire another IRA or people to partner in the investment. While you can buy properties directly, you don't need to have the full amount of the purchase in your self-directed IRA to buy a property. You can more easily invest in real estate investment trusts (REITs) or mortgage-backed securities (MBS) through your IRA than buying private investment property. In addition, you don't need to withdraw cash from your IRA or pay taxes because real estate is a permitted investment in IRAs.
The process for investing in physical real estate as an investment in an IRA is very similar to that of a normal real estate purchase, but there are some important differences. As Ward points out, buying real estate through his IRA can lead to potential landmines for the user.