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)

RELATED FAQS
  1. Can an IRA be used as security for a loan?

    The IRS prohibits the use of an IRA as security for a loan. If an individual borrows money against his or her IRA, the IRA ... Read Answer >>
  2. How do I invest my IRA in real estate?

    Investing real estate in an IRA is one way to fund an investment account. For investors who choose this route, certain rules ... Read Answer >>
Related Articles
  1. Retirement

    House Your Retirement With Self-Directed Real Estate IRAs

    Investors are now able to invest directly in real property, mortgages and other assets.
  2. Retirement

    5 Unusual IRA Investments Options

    These investment vehicles are less common, but could provide great returns while diversifying your retirement holdings.
  3. Retirement

    IRA Assets And Alternative Investments

    Interested in non-traditional investing? Make sure you follow the rules to avoid prohibited transactions.
  4. Financial Advisor

    How to Educate Clients on Self-Directed IRA Risks

    Self-directed IRAs are not for inexperienced investors. They carry these unique risks.
  5. Retirement

    5 Investments You Can't Hold In An IRA/Qualified Plan

    The list of prohibited investment vehicles is short, but it's important to know what is off limits.
  6. Financial Advisor

    Dodging the Dangers of Self-Directed IRAs

    Self-directed IRAs are an attractive option for investors looking to build nest eggs. But they should exercise caution in avoiding prohibited transactions.
  7. Retirement

    4 Basic Facts To Know About IRAs

    Money in an IRA can work harder for you. Here's what you need to know first.
  8. Retirement

    Roth IRAs: Investing And Trading Do’s And Don’ts

    Just what can you invest in in a Roth IRA? And what constitutes a prohibited transaction?
RELATED TERMS
  1. Traditional IRA

    An individual retirement account (IRA) that allows individuals ...
  2. IRA Rollover

    A transfer of funds from a retirement account into a Traditional ...
  3. Disclosure Statement

    1. A document explaining the rules of an IRA in plain, nontechnical ...
  4. Individual Retirement Account - IRA

    An investing tool used by individuals to earn and earmark funds ...
  5. Revoked IRA

    An IRA holder may revoke an IRA within the 7 days after the IRA ...
  6. Gold IRA

    Definition of Gold IRA
Hot Definitions
  1. Operating Ratio

    A ratio that shows the efficiency of a company's management by comparing operating expense to net sales. Calculated as:
  2. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  3. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  4. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  5. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  6. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
Trading Center