Creative Home Buying
Invest your IRA money directly in real estate
By
Sep 15, 2005, 00:48

The bank and big brokerage house don't let you invest your IRA (individual retirement account) money directly in real estate - they get commission on stock, bond and mutual fund transaction. And bank love to have your money tied up in certificates of deposit paying up you1.5 percent, while hey loan out your money at 7 percent and pocket the difference! But did you know that if you have a self directed individual IRA or an employer-based self-direct plan (Keogh, 402(k), SEP, or profit-sharing plan) you can legally invest money from it directly in real estate? Most people don't know that, but it's perfectly legal and specifically authorized by the IRS.

With respect to real estate, here is a sampling of IRS permitted investments:

• leverage or un-leverage real estate
• single and multi-family rental properties
• commercial real estate
• trust deeds or mortgage: first, second, o third position
• tax lien certificates
• discounted notes
• streams of payments from existing notes

One thing to keep in mind about using IRA for real estate investment is that you can't touch or spend the money until you retire. Well, you can, but you will pay income taxes on the distribution plus a 10 percent penalty. This is not the answer to generating spendable income, but it is a great way to build a healthy retirement fund, tax deferred!

Some of the third-party IRA administrators have a "certified draft" program that allows immediate access to un-invested funds for the purpose of purchasing real estate at an auction. Several such administrations are scattered around country.  Please visit site www.rehabwiz.com for current information and recommendations.