Put Your IRA to Work: Buy Real Estate

A little-known provision in the Internal Revenue Code lets you utilize funds in an IRA to purchase real estate.

Section 408 allows individuals to purchase land, commercial property, condominiums, residential property, or real estate contracts with funds held in many common forms of IRAs, including a traditional IRA, a Roth IRA, and a SEP-IRA. Keep in mind that you cannot use the real estate for your residence or vacation home. The first step is finding an independent IRA custodian that allows real estate investments to handle the transaction. Since the custodian would actually hold title to the real estate, it is important to select a trusted, reputable organization with a strong track record.

Once the property has been acquired, all property expenses, including taxes, insurance and repairs must be paid from funds in your IRA, so maintaining liquidity in your IRA account is essential. On the other hand, all income generated by the IRA property will be deposited into your IRA, which can be used to cover the costs. Furthermore, you continue to make your annual contributions into your IRA. Once you sell the property, all proceeds go right back into your IRA.

Susan H. Confair, who is part of Reager & Adler’s Transaction Group contributed this article. She holds a B.S. in Business Administration from West Virginia University and a J.D. from West Virginia University College of Law. Susan’s practice focuses on all aspects of real estate law, estate planning and elder law. She may be reached by calling (717) 763-1383 or via email at SConfair@ReagerAdlerPC.com.

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Harrisburg Magazine Readers' Choice 2011