Yes, you can, as long as the property is used for investment purposes only. The best offers to make are cash offers. In other words, you sell a few shares to buy a property outright. You may be able to have a mortgage in the name of the IRA trustee, and the trustee makes the necessary outlays for principal and interest. The interest paid is a disadvantage. Holding a long-term investment property in this way may not earn you any money.
Can IRA money be used to buy real estate for personal use?
No. In some cases, you may be able to make a one-time, penalty-free down payment on your first home. But other than that, you can’t use IRA funds to pay for real estate that you or your family members will use. Some people have made the mistake of using IRA money to buy real estate to use as vacation ownership. Although they rent the property to other vacationing families, they are not allowed to use the property for their own vacations, without risking tax-free or tax-deferred status on rental income.
How do you buy real estate with IRA money?
You must first have a self-directed account. You find a property that you want to buy. You complete the necessary forms and the account custodian makes the purchase on behalf of the IRA trust fund. Any and all funds needed to repair or maintain the property must come out of the account. Any and all proceeds from rental income or resale of a property must be returned to the IRA trust.
Do I need a custodian?
To make real estate investments, you must have a self-directed account and you must have a custodian or trustee. The trustee is responsible for preparing the necessary tax documents and ensuring that the investments you make are allowed by the IRS. If you want to use IRA money to buy it, you should be very careful when choosing a custodian or brokerage. Most are not familiar with the tax laws and other regulations regarding real estate investments.
How do I choose a custodian?
If you want to use IRA money to buy real estate, you should choose a custodian who is familiar with all applicable rules and regulations. They must have been in business for several years to ensure they have the experience to transact on your behalf without risking your tax benefits. Equity Trust is a good option.
How do I choose the right property?
This is asked even more often if you can use the money in an IRA to buy real estate. Finding the right property takes time and effort. It also takes some skill, which only comes with experience. If you are new to real estate investing, you should probably contact an investor. If you know someone, great, give them a call.
If not, there are some investors who are willing to take just about anyone by the hand and show them the way. They make it “easy” for you to use the money in your IRA to buy real estate and increase the likelihood that your earnings will be significantly better than you could with traditional investments. In other words, you can grow your savings faster than you ever thought possible.