Return to the Buying and Selling Homes Forum | Post a Follow-Up

 o
Real Estate Purchase as IRA -- Anyone Done It?

Posted by annie1971 (My Page) on
Tue, Nov 24, 09 at 20:31

I've read that real estate/second homes, etc. can be purchased as IRA accounts. The buyer cannot occupy the residence (even over night), but can rent it and treat the property as an IRA. When it's sold the proceeds can be rolled into another IRA or taken in cash with the usual tax. I'd be interested in hearing from anyone that has experience with such transactions and with tips on how to proceed.
My husband and his brother co-own their recently-deceased mother's home. They're trying to sell the property, but the house (despite the improvements we've already made) isn't selling because: 1 - the neighborhood isn't the best (it's safe and friendly, but somewhat "depressed"), 2 - there needs to be a better water source (i.e. a new well), 3 - it' has a stuck in the 80's interior. The brother doesn't want to spend any more money to get it more appealing to buyers/lenders.
I'm considering purchasing it with my IRA funds (for less than half it's market value to the brother). Put 15 to 20 thousand into it and sell it when the market is better for a decent profit. I'm willing to take the real estate risk. There wouldn't be a loan/mortgage payment, so I'm not worried about additional monthly debt. I'm just not clear how the IRA identification is established and what steps needs to be taken.
Anyone done this?


Follow-Up Postings:

 o
RE: Real Estate Purchase as IRA -- Anyone Done It?

Hi Annie,
Yes... you'd need to establish a self-directed IRA and utilise a custodian familiar with real estate transactions for such (there are plenty... use Google to find them or ask me offline... they're just not the same custodians you trade stocks with.)

You cannot "self-deal" though... so for you to buy your husband's real estate MAY be a prohibited transaction. Check with your tax advisor on that.

BTW... getting financing for investment real estate being bought and owned by a qualified plan (not an individual) can be very tough... and many folks do not have that much cash in their qualified plan to toss on the barrelhead to buy real estate....

SO.... the alternative strategy is for the IRA to buy the CONTROL of the real estate with a longterm OPTION (which can be done for a few hundred to a few thousand dollars,) then use IRA funds for the improvements... and either collect rents cashflows into the IRA... or turn around & sell the same existing OPTION to a financeable individual buyer for the profit (which, knock on wood, could be tens of thousands of dollars.. if done right, and with the wind to your back, sun on your brow, low sodium and good teeth! ;~)

Luck!
Dave Donhoff
Leverage Planner


 o
RE: Real Estate Purchase as IRA -- Anyone Done It?

Thank you, Dave: You've given me many things to consider and prepare for. I would like to see this go forward -- I think it would be beneficial from both standpoints. Will need to cover to cover the buttocks and do it right, however! Thanks, again.
Annie


 o
RE: Real Estate Purchase as IRA -- Anyone Done It?

Keep in mind the custodian will want a fee, and for RE they have to handle more paper work.

While IRA type fees are rather low (it is all computerized anyway), RE requires more 'handling.'


 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!


Return to the Buying and Selling Homes Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Please review our Rules of Play before posting.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.


Learn more about in-text links on this page here