Using your 401K/Retirement Accounts to purchase real estate investment property

Did you know that you can use your existing retirement account or IRA to purchase real estate investment property? As land and property values decrease, and investors look for new ways to diversify their retirement portfolio, many people are starting to use real estate IRA’s or Self-Directed IRA’s to add a new dimension to their investment portfolio.

There are several investment opportunties available, such as:

  • Raw Land
  • Single Family Rentals
  • Multi-Family Rentals

For more information about real estate investments, please contact Tom Anderson at 404-277-9581 or www.tagatlanta.com.

IRC Section 408 Requirements:

 

Sufficient Funds:   All ongoing property expenses, including taxes, insurance, repairs etc., must be paid from the IRA.  If you do not have sufficient funds to do so each year, you may have to remove the property from the IRA and suffer the tax consequences of doing so.

 

No Self Dealing:

         The real estate cannot be used by you as a residence or a vacation home.  It must be an investment property.

         The property may not be real estate you presently own or owned at one time in the IRA.

         Your spouse, parents or children cannot have owned the property before it was purchased by the IRA.

         Your business cannot lease space in your IRA held property.

         You cannot sell the property to a family member.

         ** You may be able to withdraw the property from your IRA and use it personally when you reach retirement age.  However, there may be substantial tax consequences on the withdrawal.

 

Other Important Information:

 

         The IRA custodian must actually hold title to the property.  The title would read “XYZ Corporation, Custodian FBO John Doe IRA.”  All contracts must also reflect the custodian as buyer.

         The IRA account holder cannot serve as the custodian of the account.  In addition, the custodian cannot give financial advice; they can only provide custodial and administrative services for the plan.