Using IRA Funds To Purchase Real Estate

Added October 8, 2004 by Ilyce R. Glink

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Summary: Although IRA rules specifically prohibit using IRA funds to purchase a property for personal use, the rules don't seem to say anything about using IRA funds to purchase a property for investment. At least, this is the loophole that many IRA holders are using to purchase investment property. Many companies specialize in helping people use their IRA to purchase investment property.

Q: Have you ever heard that a person can use their IRA funds to purchase property without any penalties? I read it somewhere in a real estate publication but our IRA manager has never heard of it.

My husband and I wish to use his IRA to purchase property for future use.

A: Although IRA rules specifically prohibit using IRA funds to purchase a property for personal use, the rules don't seem to say anything about using IRA funds to purchase a property for investment.

At least, this is the loophole that many IRA holders are using to purchase investment property. There are many companies that specialize in helping people accomplish this goal. You can find them by going to a search engine, like Google, typing in something like "IRA investment property" and starting to do your research.

Over the years, I have interviewed a number of tax attorneys, accountants and IRS professionals, and their views on the subject appear to be moderating as more people are doing this without a negative reaction from the IRS. When I first started reporting on the subject, several tax advisors told me flat out that this "scheme was illegal." I then heard back from many companies (based at first in the Southwest), saying that they had been helping people do this for years.

Before you start dipping into your husband's IRA account, be sure find a reputable, qualified company that can act as the third-party intermediary. You will need someone like this on your team to help you manage your investment.

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