How To Buy A Home With Your IRA

Many people think that they cannot use their IRA to purchase investment real estate. The truth is you can, and with many benefits. One of the many reasons to use your IRA is to diversify your investment. By purchasing land, a building, or even your retirement condo on the beach, you can tap into your IRA money without paying a penalty.

Let’s say that you decide to buy a retirement home, but you’re years away from leaving your job. You can still use your IRA to purchase the home, but rent it out in the meantime. The income you receive in rent is tax deferred until you start to take withdrawals, so you can put it away until you do retire . When you’re ready, you simply direct your IRA to turn it over to you as a distribution at the current market value.

Be sure to stick to the strict rules that go along with using your IRA for this type of investment:

• Until distribution at retirement, the house or property has to stay in the trust.
• You must treat it like any other investment.
• You, yourself, can’t manage the property. You can, however, hire a manager or company to collect the rent, do improvements and repairs, etc.
• Any profit you receive from the rents must be returned to the trustee.
• You can’t use the money from your IRA to buy the home in which you plan to live.

Using your IRA can be a wise move, because you control how your money is invested. Remember, too, that you can always get out of this kind of investment by directing your trustee to sell the house or property and reinvest the money in another place. Please contact us if you would like more informaton on purchasing investment real estate.