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. 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. 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.
  3. Retirement

    5 Unusual IRA Investments Options

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

    Using Your IRA to Invest in Property

    Explain how to use an IRA account to buy investment property.
  5. Financial Advisor

    All That Glitters Does Not Belong in an IRA

    Gold can be an attractive investment given its meteoric rise. But those wanting it within their IRA must look at some of the hurdles facing the investment.
  6. Financial Advisor

    How to Educate Clients on Self-Directed IRA Risks

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

    IRA Assets And Alternative Investments

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

    Unexpected 1099-R Form: What To Do

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

    Which Assets Can You Hold In Your IRA?

    You're not allowed to hold every kind of asset in an IRA. What can you include – and which ones are banned?
  10. 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.
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. Individual Retirement Account - IRA

    An investing tool used by individuals to earn and earmark funds ...
  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. IRS Publication 590: Individual Retirement Arrangements (IRAs)

    A document published by the Internal Revenue Service (IRS) that ...
Hot Definitions
  1. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  2. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  3. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  4. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  5. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  6. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
Trading Center