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Can You Use IRA Money to Buy Real Estate? 5 Questions and Answers You Need to Know

Except for a few prohibited transactions, you can use your self-directed retirement account to invest in just about anything. There are certain steps that you need to take, in order to make this work for you. Here’s a brief look at the necessary steps.

First, you need a self-directed account. Most companies do not offer the self-directed approach. They may allow you to select from a variety of different stocks, money markets, mutual funds, etc. But, they do not allow you to go outside of those traditional investment selections. It’s a shame, too, because with today’s market, people are risking their financial future by sticking with the “tried and true”.

You should compare the options offered by the custodian, as well as the fees that they charge. You want a large company, with plenty of experience that charges a reasonable annual fee and a small fee for setting up the account. You want to avoid companies that charge per-transaction fees. They can really add up. Once you’ve found the right custodian, there are a few more important questions to answer.

Although this is a commonly asked question, the answer is “no”. It would be considered self-dealing or an indirect benefit and it would disqualify the investment as tax-free or tax-deferred. You could be penalized the entire purchase price. It’s best to keep your deals at “arms length”, so that you are not “personally” involved in the transaction.

Yes! This is one of the most popular choices. The account will purchase the property and pay all fees associated with the purchase; closing costs, necessary repairs, maintenance payroll, etc.

All of the income must be paid directly to the account. Tenants should be advised concerning “whom” to make the check payable to. It would read something like this; Pay to the order of Company Custodian FBO (for the benefit of) Joe Smith’s individual retirement account.

Yes, you can. You can either learn by trial and error, as I did, or you can get involved with a company that makes it easier for you, as I am now.

Right after you rollover into a self-directed account is one of the best times to get started. Typically, your account has more cash at that time, so liquidating stocks and other assets is unnecessary. Today would not be a good time to liquidate stocks.

The answer is definitely, probably twice as much, as long as you make the right choices. Given today’s market with all the foreclosures there may never be an opportunity like the one that is now presenting itself for wealth accumulation.