{"id":28495,"date":"2012-03-23T12:21:17","date_gmt":"2012-03-23T16:21:17","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2012\/03\/23\/how-to-use-your-ira-for-tax-free-real-estate-investing\/"},"modified":"2012-03-23T12:21:17","modified_gmt":"2012-03-23T16:21:17","slug":"how-to-use-your-ira-for-tax-free-real-estate-investing","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2012\/03\/23\/how-to-use-your-ira-for-tax-free-real-estate-investing\/","title":{"rendered":"How to Use Your IRA for Tax-Free Real Estate Investing"},"content":{"rendered":"<div align=\"left\"><script type=\"text\/javascript\">\ntweetmeme_style = 'compact';\n<\/script><br \/>\n<script type=\"text\/javascript\" src=\"http:\/\/tweetmeme.com\/i\/scripts\/button.js\"><\/script>\n<\/div>\n<div><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-28480\" title=\"How to Use Your IRA for Tax-Free Real Estate Investing\" src=\"http:\/\/www.investmentu.com\/wp-content\/uploads\/2012\/03\/ira-real-estate-investing.jpg\" alt=\"How to Use Your IRA for Tax-Free Real Estate Investing\" width=\"220\" height=\"220\" \/><\/p>\n<p>Few investors realize that the IRS has always permitted real estate to be held inside IRA retirement accounts.<\/p>\n<\/div>\n<p>There\u2019s no telling if we\u2019ve finally reached rock bottom with home prices, but the numbers are beginning to look a little better. Demand seems on the rise &#8211; especially for distressed properties on the low end of the market.<\/p>\n<p>The big players of the hedge fund and private equity world are also diving into the market with all the cash they\u2019ve been hoarding over the last few years.<\/p>\n<p>The Oracle of Omaha himself, Warren Buffett, told CNBC last month:<\/p>\n<blockquote>\n<p><em>\u201cEquities are still cheap\u00a0relative to any other asset\u00a0class \u2014\u00a0but they\u2019re not \u2014 I would say single-family\u00a0homes are cheap, too\u2026 Single-family homes. If I had a way of buying a\u00a0couple thousand single-family\u00a0homes and had a way of managing\u00a0them, the management is a\u00a0problem because they\u2019re one by\u00a0one not like apartment houses.<\/em><\/p>\n<p><em>\u201cBut I would load up on them and I would take mortgages out at\u00a0very low rates. If anybody is thinking about\u00a0buying homes, five years ago\u00a0they couldn\u2019t buy them fast\u00a0enough. Interest rates are far lower.<\/em><\/p>\n<p><em>\u201cIt\u2019s a way, in effect, to\u00a0shorten the dollar. You can take a 30-year mortgage. You can refinance lower<\/em><em>.\u00a0<\/em><em>If it\u2019s too low, the other guy is\u00a0stuck with it for 30 years. It\u2019s an attractive asset class\u00a0now.\u201d<\/em><\/p>\n<\/blockquote>\n<p>Is there any way those of us who don\u2019t have a couple of billion dollars lying around can take advantage of this market? The answer may be an <a title=\"IRAs and Roth IRAs: What You Need to Know Before You Make This Retirement Account Switch\" href=\"http:\/\/www.investmentu.com\/2010\/January\/iras-and-roth-iras-making-the-switch.html\">Individual Retirement Account<\/a> (IRA).<\/p>\n<h2><strong>IRAs as vehicles to get real estate income<\/strong><\/h2>\n<p>There\u2019s something to Buffett\u2019s statement. Look at it this way: There\u2019s a strong rental demand and relatively little supply of single-family homes, and it could be far less risky than the stock market. Unlike four or five years ago, you\u2019re not looking for the home to appreciate in value. Your return is coming from rent.<\/p>\n<p>Now self-directed IRAs are the accounts most of us are accustomed with. Most people mistakenly believe that their IRA must be invested in bank CDs, the stock market, or <a title=\"Mutual Funds Investing Site Map\" href=\"http:\/\/www.investmentu.com\/sm_mutualfundsinvesting.html\">mutual funds<\/a>. Few investors realize that the IRS has always permitted real estate to be held inside IRA retirement accounts.<\/p>\n<p>Keep in mind that all firms acting as he custodian of your IRA don\u2019t offer the ability to hold property and deal with all associated expenses. This will require a little research.<\/p>\n<h2><strong>Restrictions<\/strong><\/h2>\n<p>The property can only be used purely as an investment, with all the income going directly back into the IRA. The owner may not occupy the home or even use it as a second home. The owner can manage the property, doing maintenance and supervising the renting, or can hire a rental management company, which would be paid for out of the IRA.<\/p>\n<h2><strong>Special Treatment of Income<\/strong><\/h2>\n<p>There are two different types of IRAs where which this is possible:<\/p>\n<ul>\n<li><strong>Tax-deferred<\/strong> &#8211; These are the traditional IRAs that allow yearly contributions to a tax-deferred account with pretax dollars. Your IRA contribution isn\u2019t taxed and you won\u2019t be taxed until you redeem the money when you retire.<\/li>\n<li><strong>Tax-free<\/strong> &#8211; These are tax-free retirement accounts. Also known as the Roth IRA, yearly contributions are made with after-tax dollars. These offer no tax advantage in the year the contribution is made because the Roth IRA contribution isn\u2019t deductible. The advantage is that earnings grow tax-free, as well as the withdrawals when you retire.<\/li>\n<\/ul>\n<p>The Roth IRA maybe more advantageous for <a title=\"Real Estate Investing Site Map\" href=\"http:\/\/www.investmentu.com\/sm_realestate.html\">real estate investment<\/a> because all income and gains resulting from real estate transactions would be tax-free. Yet most people have the traditional IRA. Although the income from the traditional IRA isn&#8217;t &#8220;tax-free&#8221;, it is &#8220;tax-deferred.&#8221;<\/p>\n<p>Good Investing,<\/p>\n<p>Jason Jenkins<\/p>\n<div>\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=Wfx2uHgMc8U:zHVkFn2Lc-8:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=Wfx2uHgMc8U:zHVkFn2Lc-8:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=Wfx2uHgMc8U:zHVkFn2Lc-8:V_sGLiPBpWU\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=Wfx2uHgMc8U:zHVkFn2Lc-8:qj6IDK7rITs\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=qj6IDK7rITs\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=Wfx2uHgMc8U:zHVkFn2Lc-8:gIN9vFwOqvQ\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=Wfx2uHgMc8U:zHVkFn2Lc-8:gIN9vFwOqvQ\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=Wfx2uHgMc8U:zHVkFn2Lc-8:F7zBnMyn0Lo\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=Wfx2uHgMc8U:zHVkFn2Lc-8:F7zBnMyn0Lo\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/InvestmentU\/~4\/Wfx2uHgMc8U\" height=\"1\" width=\"1\" \/><\/p>\n<p>Article by <a href=\"http:\/\/www.investmentu.com\/\" target=\"_blank\">Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Few investors realize that the IRS has always permitted real estate to be held inside IRA retirement accounts. There\u2019s no telling if we\u2019ve finally reached rock bottom with home prices, but the numbers are beginning to look a little better. Demand seems on the rise &#8211; especially for distressed properties on the low end of &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/fx\/2012\/03\/23\/how-to-use-your-ira-for-tax-free-real-estate-investing\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;How to Use Your IRA for Tax-Free Real Estate Investing&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-28495","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28495","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=28495"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28495\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=28495"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=28495"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=28495"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}