Using Self-Directed IRA to buy properties

[Account Closed]

I have a couple questions. I have about $25K in a self directed IRA. I want to use the money for purchasing a rental property for our real estate investing business. How would that work? Can we use part of it (being the cash) as a down payment and the rest uses a conventional loan?

Second, can I pull money out of it to put as a down payment on our first personal home? I want to make sure I understand the ins and outs

[Brian Eastman]

The IRA can buy a property. The IRA would be responsible for all expenses and all income generated by the property would go back to the IRA. There are probably not a lot of $25K properties out there, so you would need to joint venture with another investor or obtain a private mortgage for your IRA, most likely.

The IRA could be the bank and lend money to an unrelated party. This could be for a real estate deal, capital to grow a business, etc. The interest on that loan would go back to the IRA.

The IRA could also invest in:

• tax liens or deeds
• raw land
• private contracts such as accounts receivables factoring or structured settlements
• stock of privately held companies
• precious metals
• Traditional stocks, bonds, funds, etc.

... the list is extensive. Basically, the IRA is only prohibited from investing in collectibles (artwork, antiques, stamps, etc.) and life insurance.

The key is that all such investments are done at arm's length and there be no nexus between the IRA and you or other disqualified parties to the IRA.