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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.

Sort of correct, yes. The profits don't go back into the IRA, the IRA itself owns the real estate so the profits just stay in the IRA.

Do you know anyone who knows about this strategy?

Why, yes. I do. ;-)
Try this posting from a few years ago. I don't believe there are any material changes other than the increases in the allowable annual IRA contributions.

I further understand that there is no penalty for withdrawing these funds to invest.

Whoa there. You don't withdraw the funds to invest in real estate. The IRA itself needs to invest in the real estate.

You might be getting confused with a first time homebuyer being able to withdraw $10k from an IRA to use as a down payment on their home. These are two very different things.

--Peter <== who has drug out that old post twice in the last two weeks.
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