Real Estate Investments for IRA's

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Before committing to using retirement funds to invest in real estate it is extremely important that you the investor, understand the IRS rules and regulations to avoid engaging in prohibited transactions with disqualified persons.  If prohibited transactions occur then it may cause for immediate distribution of the account with taxes and penalties incurred. A prohibited transaction is any improper use of the retirement account by the account owner, beneficiary or any disqualified person (spouse, ancestor, lineal descendant and any spouse of a lineal descendant).    Investors should educate themselves by reviewing IRS Publication 590, Internal Revenue Code Section 4975, and consult with their advisors. 

Investors have access to a wide range of real estate that can be held in self-directed retirement accounts, sometimes known as "Real Estate Retirement Accounts".  Examples of real estate-related investments include: Raw land; Multi-family units; Farms; Commercial property; Resort property; Pre-construction investments; Residential property; Private funds; Condominiums; Real estate development companies

The Internal Revenue Code requires that any expense related to a retirement-funded real estate investment must be paid directly by the retirement account. These expenses can include, but are not limited to, closing costs, real estate taxes, fees, insurance, utilities, maintenance, repairs and renovations. 

  The benefit of making real estate investments through an IRA is similar to making traditional investments in an IRA, and that is opportunity for tax-deferred growth. When you hold real estate in an IRA, all income flowing into the account is tax-deferred until you take a distribution. 

 Real estate has a low correlation with other asset classes, so when the stock market is down, real estate can continue to thrive, making it a valuable diversification tool.