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Can an IRA Own Real Estate?
A traditional IRA, Roth IRA, or SEP can own real estate in a self-directed account. Eligible types of property are land, commercial property, rental condominiums or residential property, trust deeds, and real estate contracts.
- The purchase must involve an IRA custodian or trustee specializing in real estate. The custodian or trustee actually makes the purchase on behalf of the account owner and holds the title to property.
- An owner cannot have any personal use of the property. Your personal residence or vacation home cannot be owned by an IRA.
- Real estate that is already owned cannot be placed in the IRA. Property owned by immediate family cannot be purchased.
- All of the property expenses must be paid from funds in the IRA. Income generated from the investment is deposited in the IRA, which can provide the liquid funds needed for expenses.
- Real estate may be withdrawn from an IRA for use as a residence or vacation home when the owner reaches age 59½.
- The IRA can sell the property or transfer the title to the owner.
- Income tax will be due on the current value of the property if it has been held in a traditional IRA
- If the property was held in a Roth IRA, there is no tax on the distribution.
The Quest for High ROI
Portfolio diversification, tax efficiency, profit generation, consistent cash flow, inflation protection, and wealth creation are the primary goals for real estate investing. In California, it is possible to excel in these areas with real estate investments.
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