Use Your IRA for Real Estate Purchases

Q. A friend told me I can buy a retirement home using my IRAs to purchase property. Is this legal? And, if so, how do I go about doing it?

A. Yes, you can buy your retirement home using your IRAs, 401K, or pension. But there is a catch. You can’t live in the house until you can take the entire value as a distribution from your IRAs and that’s after age 59.5. Until then, you’ll have to rent it to someone else!

You can use IRAs and Roth IRAs to purchase property (homes...and even apartment buildings). You’ll have to do your homework, though. Most banks and brokerage firms don’t offer this service—it’s just too costly for them implement.

How do you set up this program? First, you can transfer your existing IRA, or roll over money from an existing plan (401K, pension) to a “self-directed IRA.” You’ll then need to have bank custodian oversee the account. They will receive an annual fee for this, typically .5 percent to 1.5 % percent of the asset. You’ll also need a property manager to maintain and rent the property. You are not permitted to manage the property, according to IRS regulations.

If you’re truly interested in pursuing this option, choose your investment wisely. Make sure you base your decision on the size of your IRA, the time between now and age 59.5, and your level of comfort with risk. For more information on investing with IRAs go to www.IraResources.com . If you are in the market for a home and need competent and caring representation, please call me at 206-226-0565.