Using IRAs to invest in Real Estate

Carol Lloyd, who writes Surreal Estate for the SF Chronicle, is usually on top of new products and services. I was surprised to hear she had not heard of using IRAs to invest in real estate. Almost every real estate investment club I've experienced plies the "self-directed IRA" as another product to get new real estate investors on board. (note the "fistful of cash" you often see on real estate investment brochures as in the image above... can marketing departments stop using this picture!) The premise is - one's IRA is not getting tapped until retirement, so invest it in a vehicle - real estate - that has proven appreciation potential.

The article is a good start for exploring how to create and use a self directed IRA.

My friend Deborah Chan works extensively with investors and adds: "I recommend IRA Services because they are very responsive to my calls, they are local in Redwood City and their pricing is the best at $106 annual maintenance fee."

"The other recommended IRA custodian is Trust Etc. Trust Etc has an article about New Roth 401(k) allowing Contributions up to $20,000 with NO Income Limits (as of Jan 2006). That means one can contribute up to $43,000 to your 401(k) or Solo(k), with up to $20,000 as Roth contributions!"

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  • 9/11/2006 1:55 PM Jeff wrote:
    Great investment vehicle, with a few caveats to be aware of.
    Internal Revenue Code 4975 <--(99% sure) dictates that the owner of the qualified fund may not have more than a 49% (family) aggregate interest in the entity that buys the property/investment.
    Check w/your accountant or attorney on how to close the loophole.
    Reply to this
    1. 9/11/2006 10:16 PM Transparent RE wrote:
      Thanks for the advice... new products offered by a limited set of companies always require due diligence... I always assume tax implications for any real estate tax deferring instrument such as 1031 exchanges need tax attorney advice.

      Reply to this

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