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Did You Know You Can Use an IRA to Invest in Real Estate?


Did you know you can use a Self-Directed IRA to invest in Real Estate? The IRS allows you to invest self-directed IRA funds into real estate. This gives you the power to use retirement funds for tangible investments that YOU control.

As a Georgia Realtor, I am careful not to give legal advice or pretend to be an expert in a field in which I have no expertise. I will, however, refer clients to the proper authorities and professionals who can give them the assistance they need. Having said that, this post is in no way giving legal advice of any kind nor do I pretend to be the expert in purchasing real estate through an IRA. This post is to serve as a general guideline. You are encouraged to contact a financial planner or qualified intermediary.

There are six rules for a Self Directed IRA

  1. You may not personally own the property purchased by your plan
  2. You may not use your IRA improperly by making sure your purchase is not a prohibited transaction as specified in the IRS code
  3. Your property purchase must be for investment purposes only
  4. You may not purchase property previously owned by a spouse or family member (brother and sister is allowed)
  5. No family members (other than brother and sister) are allowed to live in or lease the property while it's in your plan
  6. You may not locate your business on or lease any part of the property while it's in your plan

Other facts about using your IRA to purchase Real Estate

  • If the property purchased generates rental income, the income generated by the property will go back into your IRA
  • Financing with a lender through your IRA is allowed
  • All income generated from the sale of a property owned by your IRA must return directly to your IRA
  • You may not purchase a property which is presently owned by a disqualified person (yourself, spouse, family member)
  • You are allowed to buy any type of real estate as long as it is for investment purposes

Please Note:

There are differences between a 401K Rollover and a Self-directed IRA. Be sure to consult with a financial planner.

Using your IRA to purchase real estate for investment purposes is not the same as a 1031 exchange.

More information or questions may be directed to Southern Financial Services, Asheville North Carolina at 1-800-742-8167

Donna Yates, Georgia Realtor
Mountain Investments of North Georgia
706-633-0644 cell
donna@ellijay.com
www.move2northgeorgia.net

Posted Tuesday Feb 12
(02/12/08 11:29PM) — Tony & Darcy Cannon - The C Team

Donna, I did know this and it is another reason that it is a good time to invest in real estate!

(02/12/08 11:31PM) — Jonelle Simons

Great points - Yes, it's a good time to invest, I agree!

(02/12/08 11:32PM) — Ken "Yes You Can" Cook

Donna is right and this is a great way for even retired investors with no formal income to invest in real estate inside of their IRA. There are a couple of exceptions to the statement "all income generated from the sale of a property owned by your IRA must return directly to your IRA". One is advertising costs - those can be reimbursed as can maintenance, management and insurance costs. It does require a rare form of loan called a non-recourse loan.

(02/12/08 11:39PM) — Donna Yates, Georgia Realtor North Georgia Blue Ridge Real Estate

Tony:  Thank you for your comment.

Jonelle:  It's hard to convince some folks out there that it's a great time to invest.  Thank you for your comment.

Ken:  I appreciate the additional info.  It's important to note that hte IRS code prohibits an owner to fix up a property that is owned by the IRA.  The owner cannot provide a service and receive a benefit from your plan.  However, there is some sort of exception to this that is best left up to a financial planner or qualified intermediary to explain.  Thank you for your comment.

(02/13/08 07:07AM) — Charles McDonald / Your Trusted Broker for Charlottesville Real Estate

Donna this is an excellent post and informative for your clients and prospects. I think that most people do not think of this.

Your Friend in Charlottesville

(02/13/08 07:10AM) — Donna Yates, Georgia Realtor North Georgia Blue Ridge Real Estate

Charles:  I should emphasize that there is a difference in using a self-directed IRA or doing a 1031 exchange.  I think we will see more of this type investing this year in North Georgia.  Thank you for your comment.

(02/13/08 04:51PM) — Carole Provenzale Owner, Feng Shui Long Island & New York

Donna, I wasn't aware of this.  I'm going to have a degree of some kind by the time I'm off AR :)  But this is wonderful information, I'm sure if I didn't know others don't as well.

(02/13/08 05:09PM) — Donna Yates, Georgia Realtor North Georgia Blue Ridge Real Estate

Carole:  I didn't know this either until a year or so ago.  I think this provides an excellent opportunity to invest in real estate and especially now with the real estate market like it is.  Thank you for stopping by. 

(02/13/08 05:58PM) — Justin Kelcourse

I did know this, but i like the way you presented it, it will make it easy to talk about the next time it comes up, thanks

(02/14/08 07:53AM) — Donna Yates, Georgia Realtor North Georgia Blue Ridge Real Estate

Justin:  Thank you for your comment.  I'm glad you found it helpful.

(02/19/08 05:22AM) — Tom Plant - Murrieta Real Estate Expert - Coldwell Banker Residential Brokerage

Donna - Great advice and now is such a great time to make that investment. There are terrific opportunities out there,

(02/19/08 07:16AM) — Donna Yates, Georgia Realtor North Georgia Blue Ridge Real Estate

Tom:  Yes, and I hope investors will at least research their opportunities and not try to time the market.  Seems like too many are sitting on the fence and may miss out.

(02/19/08 11:12AM) — Todd Clark (Realtor), GRI (Washington Co, Beaverton Oregon)

I was a big fan of this and was looking forward to doing it with a property here in Oregon only to find out in Oregon and SW Washington it can't be done. Sounds like I need to buy some property in your neck of the woods if I want to do this.

(02/20/08 07:11AM) — Donna Yates, Georgia Realtor North Georgia Blue Ridge Real Estate

Todd:  Why can't it be done in Oregon and SW Washington?  That seems weird.  Anytime you need property here, you just let me know!!!

(02/26/08 08:54AM) — Hanh Brown

Would you like to sign up as part of our community http://www.investorsloungeonline.com/.

Please come and introduce yourself!

Hanh Dang-Brown

(02/26/08 02:46PM) — Donna Yates, Georgia Realtor North Georgia Blue Ridge Real Estate

Hanh Dang-Brown:  Thank you for the invitation and I will be happy to check out that community. 

(09/03/08 04:35AM) — Berchta Dale

Unlike most types of investments, there are many funding options for real estate investing. You can get a grant for investing in real estate if you qualify. The availability of many grants to invest in real estate as well as private lenders make it easy to invest in real estate without using your own money. However, for beginners, real estate investing is not that easy. www.Real-estate-and-real-estate-investment.info is a great site to learn about real estate investing tips for them

(09/03/08 05:00AM) — Donna Yates, Georgia Realtor North Georgia Blue Ridge Real Estate

Berchta:  Thank you for your comment and the additional information. 

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