Can real estate be put in an IRA?
Dear Mr. Priest: I hear that I can put real estate in my IRA. Why isn’t this publicized much? Scott Dillon
Dear Scott: Many people don’t realize that the IRS does not prohibit you from putting real estate in your IRA. You can actually use a Traditional IRA, Roth IRA or SEP-IRA when it comes to investing in real estate. However, there is a very strict set of guidelines that you should follow if you choose to invest in real estate within your IRA. The rules are complicated, and you risk voiding the tax-advantaged status of your IRA if you violate them. This could mean hefty taxes and penalties. Among the rules are the following key points: 1) You are not allowed to purchase property that you already own in your IRA, 2) generally, you can’t buy property from your spouse, children, parents, or grandparents, 3) you are not allowed to personally benefit from the property – in other words, it must be for investment purposes and you cannot live in or personally use the property, 3) all the income from the property must be re-invested back into the IRA.
These are just a few of the general guidelines. It is important to note that there are various ways to structure a real estate IRA that may allow the investor to accomplish specific objectives that might not otherwise be possible.The reason you probably have not heard about real estate IRAs is because most financial planners and stockbrokers are prohibited by their broker/dealers from making such recommendations to their clients. The broker/dealers refer to this as “selling away” and prohibit such recommendations because they make money by selling securities, not real estate.
Realtors may know they exist, but don’t specialize in helping clients with financial related issues such as IRAs, and accountants generally focus on tax related issues. Otherwise, there really are no other financial related professionals that are in a position to be recommending real estate IRAs to consumers. If you would like to learn more about real estate IRAs and how they pertain to your personal situation, contact my office and I will be happy to discuss them with you. Happy planning!Bob Priest, MBA, CFP, is a Certified Financial Planner serving clients locally and nationally. He can be reached at (970) 513-7077 or visit his Web site at http://www.BobPriestFinancial.com. All opinions herein are that of the author and not that of the Summit Daily News or its staff. Submit your financial questions to Bob@FinancialCompanies.com.
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