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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.
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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.

Ira
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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.
http://boards.fool.com/Message.asp?mid=17596619

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


I know, and I appreciate you pulled up a better example (I know the guy who wrote that treatise and he's quite talented :) )

Tipping cap,
Hohum
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I just saw another thread on the Retirement Investing board that inquired about an IRA potentially investing in RE

snip--

Does anybody have experience with and/or recommendations regarding self-directed IRA custodians? (And by "self-directed" in this context, I mean a custodian that allows private placements in LLCs [or investing in real estate or whatever]. So, a stock brokerage doesn't count.)


-- end snip

A link with suggestions
http://www.sterling-trust.com/Default.aspx?tabid=414


Hohum
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Yes, but there are a number of important restrictions:

- you have to find a custodian willing to do it; these guys typicall charge high fees
- if you take out a loan, you have to find a lender willing to do a non-recourse loan (that is, if the IRA defaults on the loan, the bank can't come after the IRA's other assets beyond the property)
- you cannot negotiate to buy the property; you cannot live in or manage the property, and neither can a relative -- that would be a "related party transaction". The IRA owner needs to stay at arms' length from the property by directing the custodian to take certain actions (or hire someone to take those actions).

And one benefit:
- you can take the property from the IRA as a distribution
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