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I understand that, although it is not common, it is possible to uses an IRA to invest in any type of real estate and when sold, the profits go back into the IRA. The IRA is the actual owner of the real estate. (If we have our IRA is stock, if we get a big hit on a stock, that profit stays in the IRA so isn't it possible to use a self directed IRA to buy real estate and return profits to IRA?)
Do you know anyone who knows about this strategy? I further understand that there is no penalty for withdrawing these funds to invest. Any guidance? Thank you.

Yes, it is possible to invest in real estate within an IRA, however, it isn't easy. One of the restrictions is that the IRA cannot take out a mortgage. I believe if you do a Google search for "real estate IRA" you'll find several custodians who will accomodate this type of investment.

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