A:

Investment real estate can be purchased with an IRA provided the investment does not violate the prohibited transaction rules.

An individual may want to check with the IRA custodian to determine whether this is an option, as not all custodians allow for such investments. Further, custodians that allow real estate investments in IRAs may require that the investment meet stringent requirements.

Regarding the matter of pitfalls, in addition to ensuring the investment does not violate application regulations, the IRA owner should be aware of investments risks. The IRA owner may want to consult with his or her investment professional and/or financial planner for assistance in determining whether such investments suit his or her financial profile.

The IRA owner may also want to consider consulting with a tax attorney to determine whether he or she is eligible to invest the IRA in a particular real estate investment.

For more information about prohibited IRA transactions, read Consequences Suffered by Non-Conforming IRAs.To learn about investing in real estate, check out Diversification Beyond Equities and The REIT Way.

This question was answered by Denise Appleby
(Contact Denise)

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