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Invest in Real Estate using your IRA or old 401k

March 17, 2012


If you are one of the millions of Americans who would love to take advantage of record low home prices, but your cash on hand is coming up  little short… consider using a portion of your IRA or old 401k funds to buy a rental property.

Americans have 4 Trillion dollars tied up in IRA’s that may be paying little to no interest or gains to investors.  Maybe it’s time you considered diversifying from stocks or mutual fund and real estate bargains into the mix.

Here are the basic rules:

  • The funds used to buy the property must be held in a self directed IRA.
  • The property you buy must be an investment property.  (You cannot buy a second home or primary residence)
  • You can hold 100 percent or fractional ownership of real estate in your IRA (non-recourse loans are allowed to boost your real estate buying power)
  • Monthly rental income must be placed back into the IRA account.
  • When the property is sold the sale proceeds must be deposited back into the IRA.
  • No taxes are due on rental income or capital gains held in the IRA, until the money is withdrawn at retirement age, so earnings grow tax free.
  • The IRA pays all expenses associated managing and maintaining the property.
  • You can use a property manager or manage it yourself.

Here is a simple example of how the investment could grow and fund your retirement.

You buy a $100,000 rental property with IRA funds.  You collect $10,000 a year in rent paid directly back into the IRA.  After 10 years, the entire $100,000 you invested in the home has been paid back into the IRA.  Bonus, you still own the property and you can sell it anytime you chose and put the proceeds into your account, too.  You pay NO TAXES on income or capital gains until you withdraw money from the IRA.

Buying real estate with IRA money can be a great way to diversify your retirement portfolio and take advantage of historically low real estate prices.  As with any tax related investment…ALWAYS consult your tax expert before investing.

The spring home selling season is underway and it looks to be the best one in several years.  If you are in the market for a property, this is a great time to be shopping. Visit to search for properties and other useful real estate information.



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