During our June Investment meeting, we touched on the subject of using your Self Directed IRA to purchase investment real estate.

This is a subject that many people do not know much about it. It is a perfect tool for those in the age group of 35-50 to use, since they are the ones who have accumulated enough savings in their IRA accounts (of course in the last two weeks this may not be true!!) but things will come back.
By using your Self Directed IRA, or Roth IRA you can buy an investment property, which can turn into your retirement house down the line. You can also use this account to purchase commercial properties or raw land in US or other countries.

The following rules apply when using your Self Directed IRA or Roth IRA to buy investment Properties:

The house or property must remain in the trust until distribution at retirement.
It must be treated like any other investment.

You can not manage the property. But your trustee can hire a third party—a real estate broker, or a manager—to collect rents, maintain and/or improve the property.

All rental profits must be returned to the trustee.

I know there is also a way that you can use up to $50,000 from your retirement accounts to pay toward the purchase of your own house. As soon as I have the details on this I will post it on this site.

I think the major drawback of SEP IRA purchase is the lack of financing. It is not clear yet as to whether one can take a mortgage on your IRA, which means you may not be able to use these funds as down payment. But if you have large sums of money in that account you can buy the property in all cash form You can use the funds in buying fractional shares of property through the use of a general or limited partnership.

Please consult your tax advisor on these important issues.

Call me with your Real Estate Investment questions or if you are thinking about buying or selling your properties in Los Angeles area. (818) 432-3222.