Many people think that buying property with retirement money means they have to take the money out of their account and pay taxes on it before making an investment. But that is not necessarily the case. David Moore, CEO of Equity Advantage, introduces how to buy real estate with an IRA (an individual retirement account) without first withdrawing the money. The purchase can remain tax deferred within the account, provided you work with a custodian that accommodates real estate investments.
You Can Buy Real Estate with an IRA While Keeping the Money Inside
If you want to use some of your IRA money to purchase property, your first thought might be, “How much will I have left to invest after I take the money out and pay the taxes?”
Thankfully, you do not have to start with a withdrawal. You can make the investment through the IRA itself. Instead of taking retirement money out to purchase property personally, the IRA can purchase the property as its investment.
The money is being invested, but it is not being withdrawn for your personal use. That distinction allows you to purchase property through the retirement account while keeping the transaction tax deferred.
Your IRA Custodian May Not Allow Real Estate
An IRA custodian is the company that holds and manages your IRA. But not all custodians offer the same investment choices. Many custodians do not allow real estate investments, even though real estate is permitted under IRA rules. Instead, they focus on Wall Street investments, and property purchases fall outside their practices.
A custodian’s restrictions are not necessarily the same as the restrictions governing IRA investments. If your provider does not handle property purchases, that does not mean you have to withdraw your money to invest in real estate.
If you want to buy real estate with an IRA, you will need a custodian that accommodates property investments. Otherwise, the choices available through your current account may be narrower than what IRA rules permit.
A Self-Directed Custodian Opens Up More Investment Choices
A truly self-directed custodian accommodates a broader range of investments permitted under IRA rules, including real estate.
Those options extend beyond property. Common self-directed investments include trust deeds, notes, private loans, precious metals meeting IRS purity standards, and cryptocurrencies. Real estate choices can also include land, houses, apartments, and commercial buildings.
But broader choices do not mean there are no restrictions. Three investment categories excluded by IRA rules are:
- Collectibles.
- Life insurance contracts.
- Stock in an S corporation, a particular type of corporation.
To better understand which investments a custodian accommodates, talk to your current provider or reach out to IRA Advantage.
Do More with Your IRA
Contrary to what many people think, you can make real estate and other investments without first taking money out of your IRA. But the choices available to you depend on what your current custodian offers. With a self-directed custodian that accommodates real estate, you can put retirement funds into property while keeping them safely within your account.
If you are considering buying real estate with your IRA, contact IRA Advantage to explore your self-directed investment options and understand what to look for in a custodian for your next property purchase.
The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.
FAQs About Buying Real Estate with an IRA
Can I buy real estate with an IRA without taking the money out first?
Yes. The property can be purchased through the IRA as the account’s investment. That allows the transaction to remain tax deferred without first withdrawing the money to make a personal purchase.
What is an IRA custodian, and why does it matter?
A custodian is the company that holds your IRA. Not every custodian handles real estate, so its investment offerings determine whether you can purchase property through your account with that provider.
Does a Self-Directed IRA let me invest in anything?
No. While Self-Directed IRAs give you flexibility with your investment choices, IRA investment restrictions still apply. Collectibles, life insurance contracts, and S corporation stock are excluded as investment options.
