Using a Self Directed IRA to Purchase RE investment
Hello all. I have been doing some reading on a Self Direct IRA for which an individual can take their 401k funds and move to a Self Directed IRA in order to purchase an investment property. I get the basic overview of how this works. You can buy a property but all income, expenses and any profit stays within the IRA. I am wondering if anyone out here has purchased a property using this method. If so what are some pro's and cons? Thanks
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Pros: It lets you tap into your retirement accounts to invest in real estate. All of your income and gains are tax free/deferred.
Cons: It exposes your IRA to a high liability asset. You are unable to take advantage of the tax benefits inherent to investing in real estate in the first place. It is somewhat more complicated (not much though) especially if you are using leverage.
I prefer to use my SDIRA for lending or holding notes which are much safer from a liability perspective and do not enjoy the tax benefits that owning real estate does.