I recently read an article with the following headline… "Retirement accounts can't be used for realty", she went so far to state that anyone who says it's ok is committing fraud!
Simply NOT true!
IRAs and Qualified Plans, also known as Keoghs (which include 401(k) plans, have been able to invest in real property for over 25 years. There are however, rules that go along with this that one must follow.
This concept is NOT for everyone, but it is possible to own real estate within your self-directed IRA or 401K. I am not the expert on this, but I can recommend an excellent company which is…The Entrust Group. They can help with the particulars of your individual situation, but here are some very (and I mean very) basic concepts to understand:
1. Your IRA/401K is a separate and independent entity and needs to be treated as such.
2. As a separate entity, your IRA/401K can own real estate, including foreign real estate, as an investment.
3. You may not use the property, nor can you collect rent, but your IRA/401K can!
So…if you want to buy a vacation home for your own personal use to go to the tropics a few times a year and rent it out the rest of the time…DON’T use your IRA/401K!
If, on the other hand, you want to buy property as an investment, renting it out and NOT using it personally until retirement age…then, by all means use your IRA/401K funds. But, before you do, speak to the folks at The Entrust Group, particularly, the Entrust office in New Jersey. They have offices all over the country, but I deal with the folks in NJ.
Hit ‘em straight!