Putting your hard-earned IRA assets into a “self-directed” IRA account can be a very good idea to grow long-term, tax-deferred or tax-free assets. This wealth strategy doesn’t work for everyone.
The real estate you buy must be a business property, not a personal residence, second home or occasional rental. Additionally, you can’t use your IRA to buy a property you already own, it must be a new purchase directly into the IRA. If you wanted to buy a rental property, you would open an IRA custodial account, transfer cash from an existing IRA account into the custodial account and then purchase real estate under the IRA account name. Very specific rules outline what you can and cannot do in funding and managing the investment.
You can’t get a traditional mortgage loan in an IRA but you can invest in a larger deal where you are a part-owner. The biggest downside is that you cannot write off losses or depreciation from any investment property in an IRA, so there won’t be the traditional tax savings you’d get on rental properties.
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