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 >>
Related Articles
  1. Tech

    How to Choose the Best IRA Custodian

    Finding the right custodian for your IRA means determining the sort of IRA you want. Then you can zero in on the ideal institution for the job.
  2. Retirement

    IRA Assets And Alternative Investments

    Interested in non-traditional investing? Make sure you follow the rules to avoid prohibited transactions.
  3. Retirement

    Using Your IRA to Invest in Property

    Explain how to use an IRA account to buy investment property.
  4. Retirement

    Tips For Finding The Right IRA

    There are many IRA options available that vary depending on what you want to do with your retirement savings.
  5. Taxes

    Unexpected 1099-R Form: What To Do

    Did your IRA custodian report distributions you thought were non-reportable? Find out what went wrong.
  6. Retirement

    5 Secrets You Didn't Know About Traditional IRAs

    A traditional IRA gives you a current-year tax benefit and future years of tax savings – minus the income restrictions that limit who can have a Roth IRA.
  7. Retirement

    5 Secrets You Didn’t Know About Traditional IRAs

    A traditional IRA gives you complete control over your contributions, and offers a nice complement to an employer-provided savings plan.
  8. 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.
  9. Retirement

    Designating A Trust As Retirement Beneficiary

    Designating a trust as your IRA beneficiary can be beneficial, but it requires proper planning to avoid problems.
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. Revoked IRA

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

    Definition of Gold IRA
  6. Stretch IRA

    An estate planning concept that is applied to extend the financial ...
Hot Definitions
  1. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Price ...
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  3. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center